Who is the best merchant to invest in? I presume this would be whoever has the highest base amount.

I know there used to be a bug with the guy in Riverwood where investing would give him over 10000 gold, but after patch 1.9 this no longer works I believe.

Can you only invest in one merchant or can you invest in several?

I think all merchants in skyrim can be invested in.
non on Solstheim

all main merchants can be invested in. The small stalls in Riften and Windhelm you cannot.