Basically GP4 sucks multiplayer, you can only do a quickrace where all the player cars start at the front of the grid, while you can change the race lenth, you cant do quali or practice etc.
I havn't tried it online, but there is a fair bit of lag on my network so i think it will be unplayable, but over a lan if everyone has a quick computer i dont see why you shouldnt have 5 or 6 players (I have only tried it with two).
As for compatability, everyone needs the same GP4.exe file, but you can have different cars.wads and anim.wads