1) How good are you?
2) How much good are you?
Is the second sentence correct? What's the difference between #1) and #2)? I know that it's a simple question but I need some clarification.
In general, much, as an adverb modifying adjectives, is used with a comparative adjective. Per the OED,
much, adv: modifying an expression of comparison, esp. a comparative adjective or adverb or a phrase containing a superlative adjective or adverb: in a great degree, by far
Your usage is more in line with the following colloquialism:
much, adv: modifying a positive adjective or adverb: very. Now U.S. regional (chiefly south.)
I would hesitate to call "much [adj]" ungrammatical, but it is fairly unusual with most non-comparative adjectives. When in doubt, you should probably leave off much.
The adverb “much” has a meaning of “to a great extent;” from that, you might think of “How much” to mean “To how great an extent.”
How much⸺ are you good? (or “How much good are you?” to comply with the “How (adjective)” form.)
To how great an extent⸺ are you good?
The English language does not work in such a manner (and I can’t explain the why). The phrase “How much” is only used to mean “what amount or price,” as in “How much does it cost?”, and one can just use “how” (used) to ask about the extent or degree of something.
Those written in italics are definitions from Google.