Assuming that Perim is Earth-like, it should contain more water than land. So why would the M'arrilians have flood the planet for more Lebensraum? Oh, wait...
That, and it would effectively destroy the possibility of resistance since what land remained would be under their control.
The human Chaotic players very casually treat all of the natives' life and death struggles as fodder for a game, and no one in Perim ever really calls them out for it.
That depends entirely on the player. Tom and co. certainly take the triumphs and defeats of their favorite tribes and characters very personally, and they've gone on several quests to help them. A couple of interesting twists on this is that the players may well feel they really are risking their lives. Even though the players may not die "for real" since they are essentially uploadedVirtual Ghosts of their real selves, since dying in the game means never being able to play again, plus all physical sensations carrying over... and they really do feel like they're risking their lives. The other is, just how "life and death" are some of these conflicts? Sure, as a cartoon the death toll can't be high, but it also seems to be almost completely Non-Lethal Warfare.
In "Castle Bodran or Bust, Part 2", Maxxor comments on this: "For you, the troubles of Perim are part of a game." Tom later replies that "it's not all a game to me". His actions later in the episode allow him to gain Maxxor's trust, but creatures often don't trust the humans or question their loyalty throughout the series. The humans may have different priorities than the creatures on many occasions, but the main characters do take Perim's problems seriously. However, most ordinary players don't, and it's clear that Tom and his friends are the exception to the rule- hence the creatures' lack of trust.
And don't forget like 95% of the population in Chaotic are teenagers or kids, who probably don't completely understand the magnitude of a world-wide war unless it directly affects them. Most of them just go into Perim, get the scans, and get out before some pissed off creature decides to turn them into code. Tom and the others spend time and actually get to know the creatures in Perim, even befriended a good number of them, so they better understand the war and it's hardships.
So who made the game Chaotic in the first place, and why hadn't they been sued?
Who would sue them? Everyone on Earth thinks it's a card game, the players wouldn't, and the creatures can't leave Perim.
And even if that weren't the case and somebody did have a reason to sue him/her, who in their right mind would take the case SERIOUSLY? Remember Kaz almost got sent to some kind of sanitarium for claiming that Chaotic/Perim was real, anybody who tried to sue Chaotic for something that happened in the 'real' Chaotic/Perim they'd probably be thrown into the nearest nuthouse.
Is Perim some sort of virtual world, or an entirely parallel universe to 'ours'?
This is probably more suited to WMG, but I think it's a parallel universe discovered/created via virtual world.
I think I can answer that. Perim and Earth are real, Chaotic is a sort of virtual world/hub that connects both worlds.
How much of "Chaotic Crisis" is actually a dream? Did Kaz really try to make a "large scale replica" of a scanner?
Why would Sarah help the creatures invade Earth?
You could probably chalk that up to the fact that it was a dream. The mind can pull some weird crap, and considering what Kaz's normal life is like, it wouldn't be surprising if his dreams take it Up to Eleven.
Is Perim smaller than earth? Do the people in Perim know how big there planet is? are the four tribes bigger than they look? I mean the whole thing appears to be controlled by four tribes. Yet it has such a diverce climate and the underworld goes somewhere with lava. The force of gravity also appears to be normal.
From what I can tell, it's probably the same size. Considering the advancement of their civilizations, and the fact that in one of the episodes there's creatures claiming territory, probably not. The tribes are fairly spread out across their respective lands, so who knows?