Creatin a new organization in the same deployment of CRM does not require any additional licenses (assuming that you do not have the Workgroup edition).
I'm not sure that there is answer to best practice. The length of time that you need to keep data and the method is something for your organization to decide and might be influenced by legal or regulatory issues.
You need to consider how your users will access the data, do they need immediate access and using what tools? You could extract the data using SSIS or any number of data integration tools but where will you put the data is probably the more relevant
question. And also do you need to keep everything or are some record types of no use after a period of time and can be just deleted.
Do you need to archive at all? If your database is not very big and not growing that fast, perhaps you can just keep the data and put off decisions on archiving for a while.
I know I haven't given you direct answers but I think it is very much down to what does your organization need.
