As to the power, most companies make up their own power ratings that have little relation to reality. Rough estimations at best.
In general, the bigger the bit, the more power to swing it. Little rotary tools are good up to about 1/4 in. The little palm routers are fine for bits under 1/2 in cutting diameter. The mid-size (1-2 HP) are good up to about 1-1/2 in. The big ones (2-3 HP) can handle up to about 3 in bits. Bigger than that, you get up to the range better left to shapers. You can go with a bit larger bit if you are careful by taking light cuts. Also, the larger you go, the more important it is to be able to slow down the router. The larger the diameter, the faster the cutting edge is moving. You go too fast and chips won’t clear fast enough. Then bad things happen: More friction, more heat, less cutter life, more breakage.
General rule: use the largest shank you can. Stronger shanks have less deflection and make cleaner cuts. Safer too.
-- Woodworking shouldn't cost a fortune: http://lowbudgetwoodworker.blogspot.com/
