should allusions be one or two words or can they be actual sentences?

Answer 1

That's your Waterloo. LOL just messing around.

I think it depends on what you're writing. Say if it's a song then one word might be just enough. Doesn't always have to be an actual sentence. Some poems do not have any sentences, just thoughts.

If the audience is familiar with the event or person, they will also know background and context. Thus, just a few words are enough to create a certain picture (or scene) in the their minds.

Old as Methuselah.

The Scrooge Syndrome.

Answer 2

either a word, word combination, sentence, stanza

Answer 3

Either way is fine.