You open things up to select sharps earlier than the general public, with limits. They get the benefit of potentially better lines and you get the information benefit of what the pros think the fair price for any bet is, allowing you to adjust the line before allowing bets from the general public. That's how a lot of the offshore sportsbooks handle it, but it may not actually be legal to do so in Vegas. I don't actually know.

One other factor is sometimes you actually are willing to take principal risk -- like when there are hoards of people willing to place bad bets on the local team -- you're willing to run an unbalanced book.

You buy the other side with another bookie. The risk is if the other bookies don't accept the full amount you want to hedge.

Yes, you open yourself up to counter party risk.

You limit the pot according to what you can afford to loose betting against the sharp. If your odds are alright, the small edge that the odds give the house will play out over the long run. That means astronomic sums of money are needed if you want to allow unlimited bets. Few people would be regularly betting that much. Picking misplaced odds or whatever is exploited is based on luck in the end.

Don’t honor the bet until you can balance it or limit it to an amount you can balance ?

The downside of that strategy is you will frustrate your customers and they will trade/bet elsewhere.