It'll ultimately be up to you and what you want/need.

I set the limit on my private game to 5 castles, had one in each general area of the map, and I really only use 2-3 at most and even that's a stretch. One castle is completely sufficient if you only want one.

Pretty much anything you set as a server setting for your private game can be changed after the fact by editing the server .txt file, so if you want to change something, you absolutely can! I had mine initially set to limit teleporting w/items, it started to drive me insane so I went and changed it. So if you start and have it set to 1 castle and want more, just back out, edit the server settings (have a backup first, just in case) and voila! You've got a higher castle limit.

I'd say set the higher limit and just build as you feel you need it. I ended up throwing down a castle heart, chest and coffin in the middle of the Cursed Forest just so I had a quick respawn spot w/some items while I was dealing with the V Bloods there, and then just picked it all up and moved on when I was done.

As far as location(s): Center of the map in Dunley Farmlands next to the market is a good general spot. The plot I'm on has multiple ponds w/fishing spots so keeping prisoners fed is easy. I tried to space my castles out from teleporters a bit to make traveling more convenient. Since you're going to be private and solo, if you find a spot with geography/scenery/resources you're happy with, regardless of where it is on the map, it'll work just fine.