a little more info about user import

1. I assume user import imports email address? Drupal has two fields (at least) for user>email. Which is used?

By default there is just one email field in Drupal. The email address is migrated into the "mail" field of the users table.

2. I do not understand the difference between backend and frontend user in Drupal. Does this mean that imported users have two possible permission levels, e.g. Administrator and Authenticated?

I think the README is not very clear about this. The terminology used here is for TYPO3 users. There are no frontend or backend users in Drupal. All users are given the authenticated user role.
The module gives you a choice to either migrate the frontend or backend or both types of users from TYPO3.

3. Will user fields (e.g. real name, address, fields) be imported? If not, how easy is it to migrate TYPO3 user addresses to D7 Address field or Location field (and can you give any pointers about how to do it)?

By default only the username, email, created date and password fields are migrated.

To migrate more fields you will have to add mappings for the fields in the user migration classes in TYPO3_migrate/typo3_users/users.inc. Adding mapping for more fields is pretty straightforward.
You can have a look at the migrate_example module which is part of the migrate module.

If the profile fields have been added using the profile2 module you will need the migrate_extras module to migrate the fields: http://drupal.org/project/migrate_extras

4. Will user > content relationship (primarily as author) be imported if content is also imported with the module?

Yes, the user > author relationship for both the tt_news and pages content is imported.

Regards,
Ishan