Is this the highest price ever paid for an LP?

More than rare, it appears to the only one in existance. Look at the list of cancellations; it is really hard to tell who is a bonifide bidder and who is a head case. Many of the current top bidders barely have feedback at all. No doubt they want to pay with a Nigerian bank transfer that will exceed the final cost of the auction so that the seller can transfer the "excess" funds back.

Before the days of the internet, Goldmine listed the original test press of the 1st Bob Dylan album. There were six extra tracks that never surfaced to this day. It went for over $600,000. I'd be surprised if the Velvet Underground approached that.

What is the difference between an acetate and a test pressing?

Test pressings are made normally (stamped vinyl) to test the stamper for flaws I guess -- and generally given to various executives, etc.

Acetates are made before even a wax master is made. They are acetate-coated metal discs which are cut with a lathe (from the studio tapes) just like a wax master -- except they can actually be played (just a few times, because they're very soft), and are usually given to the artist for review/approval.
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According to an AP report, it was bought for 75 cents four years ago at a Manhattan flea market. Final eBay price was $155,401. [Not to shabby!] There is only one other acetate known in existence.