It’s possible to create a responsive site that views well on a desktop, iPad, and smartphones. By using @media queries, you target screen sizes and adjust the content to fit. For instance, in one case I set it so the site shows two columns in the desktop and iPad, but the right column goes under the left column on a smartphone like the iPhone.
Using a Wordpress plugin is good if you are using a Wordpress site. Some free conversion sites, though, will limit what kind of pages, number of pages, or kind of content you can have in the conversion.
There’s no need to create a mobile-only site unless your visitors are 100% mobile.
To redirect a user to a particular site based on their device, you would use a detection script. For instance, this script redirects to the appropriate iPhone or iPad landing page in an universal app made from HTML/CSS. I suppose you could replace the URLs for mobile-formatted URLs in your web site.
If you size your graphics at 2000px for maximum impact for the iPad, then that’ll be a problem for smartphones and cell phones - too much data. Separate files is better (if high-quality graphics warrant it). However, you can use the same code if the content is mostly text.
The idea behind media queries is that you can layout one site that adapts to different devices, feeds different CSS (to not bloat css downloads on phones for example), present already scaled images and video to meet the size of a screen rather than scaling these assets as they typically will look bad when doing so, and move ADs to more prominent positions as device sizes change (advertisers get upset when a dynamic resizing pushes their right column AD to the bottom of a mobile screen. This does not provide ways to route you to m.domain.com, but the point is that you are not feeding a user a different site your are reformatting the layout of one site. In cases where you see m.domain.com they are most likely using browser/device detection like @StevenHu mentioned. Generally detection is a bad idea, as it needs to be updated frequently and there are quite a few things that can trip it up.