Hi!
1. I think what constitutes as a demo for a visual novel varies from person to person, but what you've described sounds perfectly suitable for a demo!
2. Ultimately, it is your game, and I feel like it would be unfair of me to say what you can or can't do with it after the jam is finished. As long as what you're entering into the jam features bugs, then that's all that matters, and what you decide to do with it after the jam is completely valid!
3. Commercial use just means if you wanted to charge for your game, you can do that and still enter it into the jam! Free games and paid games are both allowed.
Hopefully this answers your questions! If you have any more, or need more clarification, don't hesitate to ask!