One concern is whether it works without JavaScript or not. If your customers for some reason or other (there are several of them) do not have JavaScript enabled, or doesn't even have browsers supporting it (e.g. on a cell phone), you could get malformed input that your site may not handle correctly.
This is no problem. As soon as the autocomplete pops up, people will understand.
Yeah, you should find a way to migrate it, or put that field on top of the address. If it's already entered, people won't think they'll have to enter it again.
When your store grows, you need chaching. Anyway. At all levels.
I agree. Just fix some minor issues. :-)
For the record, a zip code does not always uniquely identify a city. see here Of course in practice, it usually does, and even if it doesn't, it would reduce the options considerably.
The multiple drop downs vs single text field discussion raises some interesting usability discussions. The separate state and country fields are commonly used. So you may be breaking the rule of "don't make me think" but the auto complete helps explain what is required.
Jakob Nielsen argues that single text fields for addresses are easier for users to use:
Such information is often hardwired into users' fingers, and having to select such options from a menu breaks the standard paradigm for entering information and can even create more work for users (http://www.useit.com/alertbox/20001112.html)
On the other hand selecting the information from fixed lists will mean less room for errors and some people prefer to use the mouse (for instance, those people go to the edit menu to access commands like copy and paste).
You need to judge your target audience and make a call.