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A generator set is rated in kVA at a stated power factor, usually 0.8, so real power available is kVA times that factor. Air density falls with altitude, so engine output derates by roughly 1% per 100 m above about 300 m, and the usable kW falls with it.
Generator output
kW available = kVA x rated pf x (1 - altitude derate); loading = load / available
Electrical results are planning estimates only. Verify against the applicable wiring rules (IEC 60364, BS 7671, NEC or local code) and have all installation work designed and checked by a qualified electrician.
Because the alternator is current limited. At a better power factor you cannot exceed the kVA rating, and at a worse one the available kW falls.
Yes. Diesel sets below about 30% load suffer wet stacking, glazing and poor efficiency, so sizing too generously causes its own faults.