1. Check local laws before going forward on this project.
2. Transformers are miniature 600/600, look on the Mouser Electronics site. Amplifier is on the Jameco Electronics site.
3. Distance and be any distance that will allow the 9 VDC to operate the amplifier, too long a distance and the current needed will be lost on the resistance of the phone line. A 1 mile line has about 400 ohms resistance.
4. Adjust audio output so as not to overdrive the phone line, use a standard linemans telephone test set, on monitor, listen in and it should sound as loud as if you were listening in on a telephone conversation on a regular telephone set.
5. The microphone may be extended about 25 feet if you use shielded cable.
6. If not prohibited by law, makes a great monitor and a typical use would the the "yard" of a large business where access is restricted and you want to monitor activity there. Try using a large plastic funnel with the microphone placed were the liquid would go into the bottle.
UPDATE --- Jameco is no longer stocking this type of audio circuit, similar circuits are made by a number of companies. Try this link:
http://store.qkits.com/moreinfo.cfm/FK648 They have several similar circuits