1. I've read that you need to be 21 to recieve ATPL, but is it possible to take all the exams and/or still work as a co-pilot for an airline before you're 21, or do you have to wait until you're actually 21 THEN get your 'Frozen ATPL'.. I would of thought that you could still do everything before you're 21 you just won't actually recieve the ATPL until you're 21?
YES, you must be a minimum of 21 to have an ATPL issued.
YES, you can have everything done anytime between 18 and 21, have a CPL issued and use it, this situation is commonly referred to as having a fATPL, although you never actually possess this fATPL thing, what you have is a CPL and meet some of (usually the theoretical) requirements for an ATPL, when you manage to tick all the boxes then you can trade-up from CPL to ATPL.
4. Just to make sure I understood everything, when you go from nothing -> fATPL you pay for flying lessons/hours and you study by yourself for ALL the necessary PPL/CPL/IR/ATPL exams, basically read the books then go and do the test? It seems a bit.. too easy to be true..
YES, you pay for the flying as you go.
People probably mostly self-study for the PPL theory exams, as they are not very hard, can be done one at a time and at your own convenience. There are a good selection of books & CD/DVDs available and plenty of practice exam papers out there, both in book and online forms. However for the professional theoretical exams it's different. Pretty much nobody does the CPL level exams, everyone just goes straight to the ATPLs, which also cover the theoretical knowledge requirements for the IR. You are not allowed to just self-study then turn up for the exams, you have to do a course with an approved training provider (such as Bristol GS), this can be done full-time if you wish, but distance learning with residential brush-up at the end is more popular if following the modular route.