Could you explain the difference between selling a domain and selling a site?
The sale of the domain is based on the value of the name itself, which comes from things like the keyword(s) used, the extension, traffic to the domain, how popular the keyword is, how valuable the keyword is, and considerations like that.
The sale of a website is normally based on some sort of multiple of revenue of the website, with the multiple affected by the industry, the demographics the site is aimed at, etc. The domain used for the website is just one small consideration out of many.
Maybe the best way of thinking about it is to think of a domain as being like a piece of raw land and a website as being like a business that's being run on the piece of land.
Does selling domain names have any inherent risks or ethical issues
even if it is a generic one?
If the domain is clearly generic, there normally won't be any risks or issues, and buying and selling is done all the time. As domains grow in value, trademark holders are becoming more aggressive about acquiring domains and sometimes will try to get one that is generic. But normally, this risk is small unless your domain is extremely valuable.