[FlashOfChaos]

1) What happens once you reach 1000 in your production skills?

Tier 2 skills become available in text to you. You can now view the next tier's items and their material requirements.

EDIT:

3) Where do you find the scrolls for scroll production?

You buy the skills at your local Skills Master. Look at the third tab in your available skills section, the one with all the production skills along with mining and rider skills. Keep in mind that they're not avaliable on the first page, but on second ~ fifth. They all cost 250c, at least, tier one scrolls.