It doesn't need the entire codebase, it just needs the call map, the function signatures, etc. It doesn't have to include everything in a call - but having access to all of it means it can pick what seems relevant.
Yes, that's exactly right. The LLM gets a rough overview over the project (as you said, including function signatures and such) and will then decide what to open and use to complete/implement the objective.
If your repo map fits into 1000 tokens then your repo is small enough that you can just concatenate all the files together and feed the result as one prompt to the LLM.
No, current LLM technology does not allow to process actual (i.e. large) repos.
