Sorry, of course you're right on "Secondly". The right construction is ω, ω∪{ω}, ω∪{ω}∪{ω∪{ω}}...
For the first point, I went through the book long enough ago that I can't rebuild the proof here, but iirc the more rigorous idea is that you can construct a bijection between 1+ω and ω given the recipe I had above for how to represent numbers as sets, but you can't do it for ω+1, which is bijective with ω∪{ω}. The axiom of infinity declares that ω itself is a set, opening the door for transfinite numbers.
For the first point, I went through the book long enough ago that I can't rebuild the proof here, but iirc the more rigorous idea is that you can construct a bijection between 1+ω and ω given the recipe I had above for how to represent numbers as sets, but you can't do it for ω+1, which is bijective with ω∪{ω}. The axiom of infinity declares that ω itself is a set, opening the door for transfinite numbers.
Better?