When you open iMovie 10 and do a File/Update Projects and Events, a copy will be made of your iMovie 9 projects and events. The converted files will be located in the iMovie 10 library in which you opened iMovie 10. {EDIT: I think you could open or create a new iMovie library in which to update the projects and events, and those libraries could be located on a different drive.} So, wherever your destination iMovie 10 library is located, that's where the projects and events will be. iMovie 10 projects must reside in an iMovie library, so they cannot be independently stored or saved in some other folder.
There should be no significant data loss or alteration due to updating the iMovie 9 files. At least I have not heard of any such. I can't say that there will be zero loss. Whenever one converts, or even opens and saves, a digital file there always is some tiny amount of data left behind, although usually it is not noticeable or visible to the eye. You would need to judge for yourself after converting. The original iMovie 9 projects and events will remain unchanged in iMovie 9 so you always will have your original files.
There technically is no size limit for iMovie 10 projects other than drive space limitations. However, extremely large projects, many hours long, could cause iMovie to hang up and operate sluggishly, and possibly crash. You would want to have a large amount of free space on the application's drive for the app to operate efficiently, as well sufficient free space on the destination drive to store the large project. Probably safest to make a duplicate of the project and work with the duplicate in case there is a crash. You can make a duplicate by moving your cursor over the project's icon in the Projects Browser, and clicking on the little circle with dots in it to the right of the title. Then select Duplicate Project from the dropdown menu. The duplicate won't take up significantly more space because it will be referring to the same original media in the iMovie library as is the master project.
-- Rich