As far as I've heard, definitely yes to online and definitely yes to connecting to Diamond/Pearl. Not only that, you'll be able to use the DS as a controller.
For character creation, I've never heard anything and I kinda doubt they'd do it in a Pokemon game.
Yep, battling online with the Pokemon from your Diamond/Pearl team get you "credits" which you can use to purchase accessories to upgrade your characters appearance. As far as storyline is concerned I think there is very litttle or none at all, think of Pokemon Stadium on N64, it is very similar in terms of "story line" I believe.