Could an SVG be constructed in such way, that when reading meta data it makes the server unresponsive. and could be used as DoS attack on the server?
What do you mean by metadata? If you are after width and height, you would have to parse the SVG files at least partially to get it; there's no shortcut of reading a few bytes from the header like there is with many bitmap formats. That brings in the usual risks of XML parsing, such as:
- external entity/DTD-subset inclusion attacks against remote files, local-network sensitive resources, local-machine sensitive files and device-files
- nested entity expansion bombs
- pathologically-nested tag structures might hit recursion resource limits
as a standard precaution you would disable all DTD processing, XInclude, XSL, XSI and entity resolution.
Could an SVG be constructed in such way, that when rendering the SVG on the client, the client becomes unresponsive and potentially makes every users browser on my site crash?
Possibly, but it's just as possible that could happen with a bitmap format. See eg the corrupt PNG file vulnerabilities of a while back.
The standard mitigation for all of these problems is to serve your untrusted resources, whether bitmap, SVG or anything else, from a different domain to your main site: a domain that has no sensitive session (cookie/auth) information in it and no ability to script into your main site's domain.
Also, would it be good practice to generate a small (200x200px) PNG for a thumbnail, or is it better to just manipulate the SVG itself with a zoom factor or something?
That would be a nice touch, but you'd have to drag in some dependencies to render to bitmap, for example Batik if you are using Java. Naturally bringing in a new complex library increases attack surface; it might be a good idea to run the thumbnailer as a separate low-privilege-account low-priority daemon task.