Good questions. I have the same doubts. If I find something I will let u know!

Is it necessary to have a separate instance to acts as a domain master host controller. Can the same jboss installation also startup slave host controller with server groups running multiple server instances on different port offsets. So if there are 2 vms that need to run 3 server instances on each can the first vm also be the domain controller ? Or is it a good idea to have a separate domain controller running on either one of these 2 vms or a different one ?

No, it's not necessary to have a dedicated domain controller.  If I'm understanding your question correctly, you want, on the same box, to startup a one JVM with jboss-as7 running as a domain-controller and another JVM running as a slave host controller.  I don't see why this is not possible provided you took care to avoid any port conflicts. Something like this: 

$JBOSS_HOME/bin/domain.sh --domain-config=my-domain-controller-config.xml --host-config=my-host-controller-config.xml

$JBOSS_HOME/bin/domain.sh --host-config=my-slave-host-config.xml

Does the domain controller create a single point of failure in controlling the multiple instances. What happens if the domain controllers goes down ? Does it have to be brought up to start and stop the slave host controllers and there server instances.

In my experience, the answer is "sort of".  Losing a domain controller in a domain that is fully initialized and running will not cause much harm.  Slave hosts will continue to operate normally. The slave hosts will know that they've lost contact with the domain controller and they'll reestablish communication once the domain controller comes back online.  You'll be able to shutdown slave hosts without issue.  However, what you will not be able to do while the domain controller is down is manage the domain in any way (obviously).  Nor will you be able to start up any slave host controllers.  Slave hosts will fail during startup if they cannot contact the domain controller.

Is there a deployment folder where a war can be placed in the master node so that it gets deployed to all the slave node in a domain managed setup in JBoss AS7. I know that we can use the jboss cli to deploy to a server group which places the artifact under the JBOSS_HOME/domain/data//content directory. However I would like to find out if there is a way that it can be placed in a deployments folder under the domain of the master node (e.g. JBOSS_HOME/domain/deployments) that is similar to the one available in the standalone mode(i.e. JBOSS_HOME/standalone/deployments) so that the deployment scanner picks it up and makes it available to the slave nodes in the domain without the explicit deploy command via CLI. How do we deploy artifacts to domain management instance using CI tools via http (jmx-console like ops) or bash scripts ?

Nope, there is not.  The documentation is pretty clear tha the filesystem deployment scanner is not supported in domain mode.  You have to deploy with the CLI or the web console.