Well, my first comment is that most of your questions are not really unique to Oracle Forms. You are basically asking for someone to design your network and configure it. Oracle Forms runs as a Java Applet. There is no real Oracle magic here. So, whether you are running the NASA Skywatch applet or the Oracle Forms applet, the requirements will basically be the same.
(1.) Is type of system, buildable using Forms?
(1.1) What kind of network connection is needed between headoffice and dealer?? VPN, dialup or something else?
Dialup??? Does anyone still use that? VPN will provide better security if the application will be accessible via the Internet. Regardless of whether you use VPN or not, using SSL is highly recommended.
(1.2) Will there be performance implications?
Again, performance implications here will be more related to the network (e.g. bandwidth, latency, etc) between client and middle tier. Specific to Oracle Forms, initial startup might appear longer than if the app was being run in a local network, but because the applet is cached, the initial delay would only occur the first time it was launched. VPN and/or SSL will cause some performance issues, but these are a must in order to ensure security.
(1.3) Will have to create a Java website type application instead?
I don't understand this one. Oracle Forms runs as a Java applet, so you already have your "java" application.
(2.) Is it possible for dealers to run the appilcation (using IE) without downloading JInitiator or Sun JRE?
-- i.e. Can't v create a separate statup HTML file in the dealerapp section where v instruct 2 use whatever JVM available in the dealer machine?
Exactly which Java version is needed on the client machine will be based on exactly which Oracle Forms version you are using and the platform the client is using. Refer to the specific Forms' version Certification Guides for details.
(3.) Does the JVM come automatically installed in Windows machines???
-- Or, does the dealer have to install it separately?
Microsoft Windows does not come with Oracle Java installed. It will need to be installed by the user (if they have "Administrator" privledges) or by an administrator.
Finally, if this is a new installation and a new product to you, I recommend using a current Forms version and not an old one. The latest version is 18.104.22.168. This version supports using Java 6 or 7 on the client. However, I would not recommend using Java 6 as it has reached its end of life.
More information about Oracle Forms and its documentation can be found here:
In addition: if you plan to create a new application you should ask yourself if a thick client (like the forms applet) is really necessary for your application. If a plain HTML front end is enough and you are in the process of starting from scratch you might rethink if you want to use forms.
If your client wants to have a desktop-application like system then yes, webforms should be good enough; however as said if a thin front end is enough you should think about if running forms over a small bandwith network and the whole discussion about the Java Plugin on the clients is worth the trouble. There is no doubt that it is possible, there are just some caveats which you won't have if you use a toolset made for running over small bandwith networks and without browser plugins in the first place. Have a look at APEX for example.