What happens to the game after you finish kanto? I mean finish all the gyms and the E4. I take it you move onto johto but what happens to all your pokemon and items? Do you get to take them all along with you and use them in johto?

Your Kanto-Pokemon will be locked once you stop into Johto. Those will be unlocked as soon as you've beaten the 8th gym leader of Johto.

You'll keep your items and your money, I advise to take the items off your Pokemon though.

All items will stay , your kanto pokemons will be locked untill you beat johto 8th badge , you can trade and use level 100 pokes from first if you buy them tho , after u finish 8 badges you can use your kanto pokemons at johto elite 4 :)

But once you're in Jotho you can only buy Pokemon from jotho as well. It would not be possible to get kanto Pokemon until you get the 8th badge.