"It is not far."
I think it just makes the sentence more polite. It's です and not ではありません because とおくない already supplies all the necessary information.
Correct me if I wrong, but from what I learn, some long vowels are written with 'o' (お) instead of 'u' (う).
No, it would be "That one is not far away."
Or rather, it wold be if you wrote それは (sore wa), now it says sore ho, which I'm not sure if it means anything at all...