Ok, so the South Park characters are based on real people (seen in the previous answer).
They are NOT based on the actors who voice the characters. I actually know who is based on Kyle and his name is Kyle Sund, who owns the close up of Herbie (the Volkswagen beetle). Ya know, where the show Lindsay Lohan actually inside Herbie. Ok, that was just some stuff about him. Ok, anyways that answer was half right and half wrong. Hope that helped you guys.
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They live in the fictional town South Park in Colorado.
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The South Park characters were not drawn. They were cut out from construction paper and used stop motion. Now the characters are computer-generated.
South Park episodes can be viewed free online at Hulu and YouTube. The website South Park Studios also allows one to view the episodes for free and has a guide on the characters.
In the TV show, yes. In real life, no. There is a place called South Park in Colorado, but it's like a park or a street (I forget which one) South Park is a part of Park County along with North Park and Middle Park. :D