I don't tend to review until I'm committed.  Now, that being said, I will sometimes go ahead and review after a first chapter because I can already tell I'm going to really like following the story.  If said story starts to go in a direction that's not really my cup of tea, I'll stick with  it for a few more chapters anyway.  Occasionally, I'll be pleasantly surprised and end up finishing anyway.  Now, I've admitted before that I'm really bad about leaving reviews.  I'm doing better, because I really think reviews help me to stay motivated as a writer, but if the writer isn't responding to my reviews, I end up making them fewer and farther between-- or maybe stop all together.  I think the dialogue with the writer is part of what makes leaving reviews fun.
As far as the question about what to do when you stop reading, I think it depends on how well you know the writer.  If it's someone that you're somewhat comfortable with because you've had an ongoing dialogue, I think it's perfectly fine to say, "I'm not reading any more because, ________. "  Of course, if the reason is, oh, the writing sucks, I think that may be better left unsaid.  This is one of the reasons I tend to be a little inconsistent with leaving reviews on the stories I'm not 100% committed to finishing.  I'd hate to be leaving reviews for every chapter then just all of a sudden stop with no explanation at all.  As a writer, that kind of thing hurts, even if it's not personal.