No one has yet actually answered your first question. The real problem with $\left\{\frac1{n-3}\right\}$ is simply that it's very sloppy notation. However, it will normally be understood to mean $$\left\langle\frac1{n-3}:n\in\Bbb N\text{ and }n>3\right\rangle\;,$$ which is a perfectly good sequence with domain $\{4,5,6,\dots\}$ instead of $\Bbb N=\{0,1,2,\dots\}$. As such it is bounded and converges to $0$.
If one attempts instead to interpret it as $$\left\langle\frac1{n-3}:n\in\Bbb N\right\rangle\;,$$ a sequence with domain $\Bbb N$, it is of course nonsense.
Any ordered set that 'looks like' $\Bbb N$ can reasonably be used as the domain of a sequence, but in practice you'll find that the domain is almost always of the form $\{n\in\Bbb Z:n\ge n_0\}$ for some integer $n_0$. Note that $n_0$ isn't always non-negative: you may find sequences defined on domains like $\{-1,0,1,2,\dots\}$.
By the way, if you must abuse the curly braces by using them for sequences, and unfortunately it's a very common practice, you should probably indicate the limits of the domain, e.g., $$\left\{\frac1{n-3}\right\}_{n=4}^{\infty}\qquad\text{or}\qquad\left\{\frac1{n-3}\right\}_{n\ge4}\;.$$
The matter of limit points of sequences is complicated by inconsistent terminology. It makes sense to talk about the limit of a sequence only when the sequence converges to some number $L$, in which case all of its subsequences converge to $L$ as well. If the sequence does not converge, I prefer to talk about its cluster points, to distinguish them from the unique limit of a convergent sequence; these are the points to which some subsequence of the given sequence converges. A bounded sequence of real numbers always has at least one cluster point, and examples like $\langle (-1)^n:n\in\Bbb N\rangle$ show that it may have more than one. It's not hard to show that if a bounded sequence has only one cluster point, the sequence actually converges to that cluster point, which is therefore the limit of the sequence. The example $$x_n=\begin{cases}0,&\text{if }n\text{ is even}\\n,&\text{if }n\text{ is odd}\end{cases}$$ given by Johannes Kloos, however, shows that this does not necessarily hold for unbounded sequences: this has the unique cluster point $0$ but obviously does not converge to $0$.
(I mean undefined elements, not helpfulness, of course.) – copper.hat May 11 '12 at 06:57