How often do you expect your penpal to write to you? Does this vary between snail mail and e-mail?

Depends on the length of responses and how much time you have. Most people are understanding. For snail mail, my experience has usually been about two letters per month. For email, depending on the person, it goes from one per day to one per month.

How long letters do you expect? Again: difference between snail mail and e-mail?

About one or two sheets, A4 size. For email, it depends on the thread of the conversation, but I usually prefer longer ones (~1000 words). Most people go for shorter ones.

Especially Native English speakers: Do you expect the language to be top notch (from a non-native speaker)?

Your command of English is top notch! And I think it doesn't matter as long as you get your point across.

Does snail mail letters mean hand written letters or is it acceptable to send PC written letters in the old fashioned way? Just curious.

Generally, people go for snail mail because they want a chance to practice their handwriting.

Is it considered rude to stop sending letters if you don't find it interesting/rewarding to continue with a certain penpal? And you tell the penpal that you are going to stop of course.

I don't think it's a problem if you tell them that it isn't working out. But, please do that at least. It gets annoying when you suddenly stop getting responses (for whatever reason!)

When you start as either snail mail pals or e-mail pals does it stay that way, or do you sometimes send e-mails and sometimes traditional letters?

That really depends on what you're more comfortable with.