What does ^@^@^@ mean in a text file

1. Must a text file be a regular file? In the above excerpt it does not explicitly say the file must be a regular file

   No; the excerpt even specifically notes standard input as a potential text file. Other standard utilities, such as make, specifically use the character special file /dev/null as a text file.

2. Can a file be considered a text file if contains one character and one character only (i.e., a single character that isn't terminated with a newline)?

   That character must be a <newline>, or this isn't a line, and so the file it's in isn't a text file. A file containing exactly byte 0A is a single-line text file. An empty line is a valid line.

3. In the above excerpt, it makes reference to "lines". I found four definitions with line in their name: "Empty Line", "Display Line", "Incomplete Line" and "Line". Am I supposed to infer that they mean "Line" because of their omission of "Empty", "Display" and "Incomplete"

   It's not really an inference, it's just what it says. The word "line" has been given a contextually-appropriate definition and so that's what it's talking about.

4. Can I safely infer that if a file is empty, it is not a text file because it does not contain one or more characters?

   An empty file consists of zero (or more) lines and is thus a text file.

5. Does the "zero" in "zero or more lines" mean that a file can still be considered a text file if it contains one or more characters that are not terminated with newline?

   No, these characters are not organised into lines.

6. Does "zero or more lines" mean that once a single "Line" (0 or more characters plus a terminating newline) comes into play, that it becomes illegal for the last line to be an "Incomplete Line" (one or more non-newline characters at the end of a file)?

   It's not illegal, it's just not a text file. A utility requiring a text file to be given to it may behave adversely if given that file instead.

7. Does "none [no line] can exceed {LINE_MAX} bytes in length, including the newline character" mean that there a limitation to the number of characters allowed in any given "Line" in a text file

   Yes.

This definition is just trying to set some bounds on what a text-based utility (for example, grep) will definitely accept — nothing more. They are also free to accept things more liberally, and quite often they do in practice. They are permitted to use a fixed-size buffer to process a line, to assume a newline appears before it's full, and so on. You may be reading too much into things.