1. Well, I don't really want to go through the hassle of upgrading to 097 for all the worlds, but I would like to add more worlds the britain, is this possible?

2. How would I go about using higher version clients(I use v2 right now) do I just set the encryption to none?

3. Regarding #2 would I have to manually add all the weapons and npcs in more recent versions of uo?

about number 3
you would have to find a MUL patcher program, look around there are some i know. you would also need the gumps and tiles. so yes, as far as i know, you would need to manually add them.

pol096 was the first core to allow map switching - ie realms support. But I don't see any point in converting to 096 when 097 is fine (rc5 is stable and works fine apart from some minor things you might need to workaround).

Converting to 097 may be worthwhile if you plan on using pol for a while yet. I went throught the pain, but I admit it took a while to tediously make the changes. Realms wasn't too hard, and you have to add a few steps to magery scripts that the core no longer does. Changing a live shard from 095 to 097 was complicated but I learned a lot.

Later clients will work fine on any recent version of pol if you UORICE the client, and in pol set Encryption to none and also set EnableFlowControlPackets to 0. (Just follow the example of the distro.)

Without packethooks (core 097) you won't be able to enable later client features unless you use a third party hook system.

You can add most items, most animations and all gumps from later clients to a v2 client with verdata patching. It complicates things a lot, and if you have v4 clients on your shard you will find your animations will clash between versions and it won't be pretty to find animation numbers that work for both. But it can be doe. Of course, Verdata was thrown out when the v5 client came along, so you need to take that into account if you have any custom Verdata mods and want to adopt a later client.

However, at this point, I think you have to decide how much of an investment in time is pol worth to you. In my opinion you gain much in going to a v5.0.9.1 client and converting to pol097. It will take you time, a lot of time, but in the end you will learn so much that it will be worth it.

Well im already at 096 and if i was to convert it would be now while im still barely working on it
But I dont know where to find what changes i need to make and such

If you are already on 096 then read the core-chages file for 097.

You can skim over bugfixes, but read carefully anything that has been changed or deprecated. Additions are mostly something you come back to later.

I don't think 096-097 is going to be too hard.