Heyyy... That's my cat!
To answer all your questions about pygmy cats, there ARE actually what people call "teacup" breeds. What it actually is is a form of dwarfism know as primordial dwarfism.
It causes severe growth retardation in the cats and several severe health problems.
My cat, Melvin, is one of these cats. He is currently 9 months old and only 6 pounds. This may seem like a normal cat weight but the problem is is that he is actually OVERWEIGHT and the vet has told us that once he hits 1 years old, he will most likely need to diet. His practical weight for his body size is around 3 to 4 pounds.
Thankfully, he's all fluff, so he looks a bit bigger than he actually is.
Here's some videos of him nowadays:
He actually has his own website, as well: http://www.mouchois.com
Some of the health problems of cats with this disease are seizures, neurological disorders that can sometimes cause blindness, heart murmurs, enlarged heart, bone deformities (misshapen jaw, bowed legs, etc), and I think a few more, but I can't remember them all. Melvin has all of these. He's blind in one eye, has seizures, has heart murmurs, he still has not gotten his adult teeth, his heart is a big larger than should be for his size, he was born without testicles (or they are extremely tiny), he has bowed back legs and a soft spot on the top of his head.
Beyond all of these health problems, he is a genuinely healthy cat and well cared for (spoiled to death). I'm currently NOT putting him on the diet due to the vet's advice to keep him well nourished due to the fact that this form of dwarfism is rather rare. As soon as his bones are completely formed and that soft spot goes away (which we aren't sure if it will or not), we are feeding him kitten diet, raw food, and wet food (to keep UTIs down). This adds on the pounds, but keeps him from needing mass amounts of supplements.