If I have used both Online Character spots on the PS4, and I want to transfer my PS3 character, can I still do so. Also, will it only transfer and replace one of the characters, so I can use the other one and keep the level and everything, or will overwrite both? Will I be able to choose which one to replace?
From the Rockstar Support Pages it states in bold:
Any existing PlayStation®4 GTA Online character and progression data will be replaced by your previous character and progression data during the transfer, except for any existing in-game money, which will be combined with your transferred balance.
From reading the article, it sound like it transfers your character sets, meaning if you had two characters on PS3, it will transfer both, you don't get to choose which characters you want only (read step 4 on that support page under the How to transfer your previous Grand Theft Auto Online character and progression data to PlayStation®4 section). Step 4 states that you will be prompted to keep either the data on the PS3, or the data on the PS4.
You can only transfer once, so choose wisely!