As for the first question, I think it modifies "Some estimated that there are 25 assorted insects". IMO we could rephrase it as:
Some estimated that there are 25 assorted insects over every temperate square mile, hanging in the air, in a column extending upward for thousands of feet.
I don't say it's great style, but I think it works.
Regarding question 2, I think "in a column extending upward..." modifies "every temperate square mile" as you suggested.