(Sorry for the delay in answering John. Again, I didn’t realize this question was pending.)
I will be brief on this first pass, but feel free to ask me for more specifics.
1) Well, I devoted the whole lecture to this, right? 🙂 But if you’re asking for me to boil it down succinctly: I think Say was trying to refute the common explanation that recessions were caused either by a dearth of money, or by a glut of production. So to show why those were simplistic and ultimately unsatisfactory explanations, he demonstrated that when you demand something from a merchant, the ultimate source of your purchasing power is the goods you yourself supply to the market. Also, a world in which everyone produces more stuff is not one of misery, but is actually how material progress is possible. So once you see things that way, you realize it doesn’t work to say a recession is caused because people don’t have enough cash to demand the full output from all the merchants, or because all the merchants produced too much collectively to be sold.
2) This is tricky. The crude version is, “Supply creates its own demand.” So I think a lot of Keynesians, including Keynes himself, took Say to mean something like, “By the very nature of exchange and accounting, everything brought to market must necessarily find a buyer.” I think some have a weaker version of what he meant, and think he was saying something like, “Prices are sufficiently flexible that markets quickly clear and you can’t have a general glut.”
3) The sophisticated Keynesian rebuttal goes something like this: “Say argued that it was impossible for there to be an excess supply in *every* market. By logic, we realize that if there is an excess supply–a glut–on one side of a trade, then there must be excess demand–a shortage–on the other. For example, in a barter economy, if people are trading apples for bananas, then no matter what the price is, you can’t have a glut of both apples *and* bananas. Either you have a glut of apples and a shortage of bananas, or you have vice versa, or you have the market clear for both fruits. But,” the Keynesian continues, “Say made a critical mistake. He forgot that in the modern economy we use money on one side of every exchange. And so his tautology is still obeyed, if we assume there is a glut for every good and service *except* money, while there is a shortage for the money commodity. Then Say’s logic is satisfied, and yet this is what everybody means by a recession where there is a general glut and a deficiency in purchasing power or demand.”
4) Austrians like Rothbard stress that there can’t be an overproduction in general; that’s a sign of opulence, not misery. However, there can be too much produced in some sectors if there is too little produced in others. So this isn’t an issue of a momentary shortage or surplus, but rather reflects the mistaken plans of the past (which don’t reflect consumer preferences etc.). Also, I think many Austrians think prices are flexible enough to make markets clear soon enough, so long as governments and unions don’t interfere.
5) So long as prices and wages are flexible, it shouldn’t matter for very long. In the 19th century prices would collapse after a boom/bust, workers would get laid off, but then nominal wage rates would collapse too. So employers would hire workers once their wage rates fell back in line with the lower prices of the final product.
6) I think my answer to 4) helps here?
7) I don’t think so. And what you are talking about is really just a micro phenomenon for a particular market, having to do with elasticities, if I understand you. In general, supply and demand jointly “determine” prices. Also, from the Austrian perspective, even supply curves are really just the flip side of demand curves. Everything is ultimately drive by subjective preferences. (You can search the PDF of Rothbard’s ME&S for “reservation demand” if you don’t know what I’m talking about.)