Life peers are created constantly and have been for many decades now; the crown has always had the right to create them. It is the primary means by which the government of the day ensures that the House of Lords has members (Tony Blair filled the house to the brim!). The Law Lords, life peers who were senior judges of appeal, always sat in the House until the UK supreme court came into being in 2009 (prior to that the House of Lords was the highest court in the land) and the most senior bishops of the church of England sit there as the ‘Lords Spiritual’, though they are never enobled. All members have the right to sit their whenever they like once it is established that their title entitles them to a seat, they can listen to debates and vote. There is no limits on how often hey can attend.

The power of the crown to grant honours really does rest with the Queen alone, she really can refuse to grant them if she wants but the British ‘constitution’ is a very ‘polite’ affair and she is highly unlikely to ever refuse (although if she did it would be in private discussion with the Prime Minister anyway, in which case, depending on how upset he/she is, we may never hear of it). Any grant is made ‘on the advice of the Prime Minister’ but in UK legal theory ‘advice’ in this case is precisely that and there is no legal mechanism to force the Queen to grant a title if she chooses not to do so. It would take an act of parliament to bring such a forceful measure into law.

Now, there is such a thing as the Crown being able to grant a title that cannot be inherited — a life peer (the Crown can do whatever it likes with the titles, since the Crown holds them and grants them or takes them away). But these are not common — and should not be confused with the American notion of buying a title of “Lord or Lady of the Mannor”. It is the custom to give any past PM such a title as an honor.

Typically, a life peer is created by Parliament — the Crown’s ability to grant titles is really held these days more by Parliament (the Crown approves the honors list drafted by Parliament and presented to the Queen by the PM these days). A life peer is more a title to honor someone’s service, they are not created by “a writ of summons” (i.e., they’re not called before the Crown for their honors). They don’t really sit in the House of Lords, but can serve there to hear appeals. So they’re not appointed as one-offs to the House of Lords.

And if you want to read up more, try http://www.indopedia.org/Peerage.html

A knight is a “sir” and his title is only with him — as noted, his wife is a ‘lady’. That knighthood is an honor that dies with him.

As to the House of Lords, you must be carry a title given to you/your family by the crown. You also must be called before Parliament to be confirmed as “Lord YourTitle” and then you can take your seat in the House of Lords.

The eldest son of a nobleman may be address as Lord, but will not be allowed to sit in the House of Lords until he comes into the full title (inherits and is called to Parliament and confirmed).

And there are only lords in the House of Lords — no ladies there.