There actually is a huge difference between getting in in-state and OOS. The admit rate last year for OOS students was 32%, compared with 45% in-state. This year, the OOS admit rate dropped to around 30%. There were 10,928 OOS applicants applying for only 1/3 of the spots in the class, so obviously it is harder to get in to U. Va. from OOS.
Yes, it seems as though students are applying to more and more schools each year. There's a thread somewhere in the general college admission forum here with the increase numbers from many different schools. Everyone is up.
This is an "echo" boom generation, caused by the kids of the baby boomers. There are more qualified applicants applying to a relatively static number of schools. Its supposed to come to a head in 2009, with the largest number of applicants, and then drop off from there.