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Yuo cna leverage on smart licensing supported by 3504 as well. AS far as you have enought AP licenses attached to your smart account, you can termiante APs on the 3504 WLC. No local license will be required on the WLC iteself.
In both cases, you only need to attach DNA licenses to the smart accont configured on the WLC. Following presentation is a good resource to understand the licensing for DNA/Wireless:https://www.cisco.com/c/dam/en/us/products/collateral/software/dna-s...
Yes it is supported and Cisco calls it FlexConect. Please refer to the following link:
https://www.cisco.com/c/en/us/td/docs/wireless/controller/8-3/config-guide/b_cg83/flexconnect.html
