Information Classification

1 - Is there anything that would stop us from simply having two classifications Public and Confidential?

ISO 27001 does not prescribe classifications to be applied to information, so it is acceptable by the standard that your organization may adopt only Public and Confidential levels.

2 - Assuming we adopted a mandatory classification protocol at an individual document level on say December 1. What would be the recommendation as to classification of all pre-existing documents

I'm assuming that by classification you mean define it as different from public.
 
Considering that, the classification of pre-existing documents will depend on your needs, the results of risk assessment, and applicable legal requirements.
 
For example, for HR processes you may need to classify all documents related to employees, regardless of how old they are (in most countries this related to laws or regulations). On the other hand, for the Marketing campaign for a new product, you only need to classify it until the new product is released.
 
It is important to note that the classification of information at the document level is impractical for a large number of documents.

3 - ...If the response is that every old document must  be classified this would be impossible for us. So therefore my next questions are around whether we can classify not at document level, but at a higher level.:

ISO 27001 does not prescribe levels to consider to classify information, so you can use the classification that better suits your needs. For example, you can classify documents according to type, the processes or business units they are related to, or where they are stored (e.g., contract type documents, documents related to the software development process, documents related to the HR department, or documents stored in the CFO office).  

4 - Would it be legitimate to have a classification policy at a document type level?

Considering previous answers, a classification policy at the document type level is acceptable for ISO 27001 certification purposes.

5 - Or is it legitimate to classify based upon where the electronic document is stored (eg everything  in this Microsoft Teams channel is Confidential?

Considering previous answers, classifying documents according to where they are located is acceptable for ISO 27001 certification purposes.  

6- Overall any general thoughts / advice you may have for creation of a workable classification policy for such a small company?

These articles will provide you a further explanation about information classification:

• Information classification according to ISO 27001 https://advisera.com/27001academy/blog/2014/05/12/information-classification-according-to-iso-27001/
• Why is ISO 27001 applicable also for paper-based information? https://advisera.com/27001academy/blog/2019/01/21/why-is-iso-27001-applicable-also-for-paper-based-information/