Definitely SQLite. Easily accessible from Python, very fast, universally supported, no complicated setup, and everything is stored in a single file.
It even has a number of good GUI frontends. There's really no reason to look any further for a project like this.
Ha no. SQLite can easily handle tens of GB of data. It's not even going to notice a few thousand text files.
The initial import process can be sped up using transactions but as it's a one-time thing and you have such a small dataset it probably doesn't matter.