I was reading that melotonin may help with gastritis- apparently the cells in the gut secrete more melotonin than the pineal gland?

If this is true...

I have never seen anything specifically on the levels of melatonin produced by intestinal cells, but it would make sense the levels are higher.  Melatonin is produced from serotonin.  And 80% of the body's serotonin is produced in the intestines.

Melatonin itself is actually produced by a number of different cells in the body including some immune cells.

1) Wouldn't increasing serotonin help gastritis?

I would not recommend it for several reasons.  Selective serotonin agonists are used in the treatment of gastritis.  But there are so many different serotonin receptors in the body, including 4 in the gut, which can have different effects depending on what receptors are activated.  This can also explain why some research has indicated that serotonin may also play a role in the pain of gastritis.

The other issue is that high levels of serotonin have a number of adverse effects on the body, particularly the heart.  These include heart valve damage and arrhythmias. There are safer ways to deal with gastritis.

2) Why does 5htp actually cause gastritis in many people?

Again the research shows both a cause and a treatment depending on the receptors activated.

As far as causing it I would say it is more of  promoter than a cause.  Just like I doubt estrogen causes cancer, but rather acts as a growth medium for existing cancers.

Serotonin has such a wide array of effects on the body including dilation and constriction of the blood vessels depending a variety of factors.  I would suspect that the gastritis is from the dilation effects of the serotonin.  Inflammation itself is a process involving excess  vasodilation.

Finally, what is the mechanism by which serotonin affects appetite? Does it increase it or decrease it? I have read both.

Serotonin decreases appetite.  This was the principle behind Phen fen.  The first drug was increasing serotonin to kill the appetite.  But it also made the person tired so they added an amphetamine to prevent people from getting sleepy on the drug.   Of course the drug combo had some serious side effects.

Serotonin decreases dopamine release.  Since dopamine increases appetite the serotonin decreases appetite by blocking the release of dopamine.