I am planning on using TestFlight from next month onwards to beta test my App.
Apple allow 25 internal users and 1000 external users.
Do all 1000 external users needs to register their device in developers account, do they need to install provisioning profile separately, or do they need to install and register on developers accounts?
No need to register the device. You need to add them to your iTunes Connect under "External Testers". When you need to test a build, you need to upload it and invite the external testers using their mail. Remember, if you are planning to add external build testing, there is also a beta app review by Apple.
Check Inviting TestFlight Beta Testers for more details.
Internal Testers
Get feedback quickly by sharing your beta builds with up to 25 members of your team who have been assigned the Technical or Admin role in iTunes Connect. Each member can test on up to 10 devices.
External Testers
Once you’re ready, you can invite up to 1,000 users who are not part of your development organization to beta test an app that you intend for public release on the App Store. Apps made available to external testers require a Beta App Review and must comply with the full App Store Review Guidelines before testing can begin. A review is required for new versions of your app that contain significant changes. Up to 10 apps can be tested at a time, internally or externally.