1) if the farmer gives a bonus to food production, leave him garrisoned in the city.
2) He's not part of your faction, so no he's not waiting for your orders.
3) Yes, build whatever you like in your city. The focus of the campaign is, however, on your hero.
4) If you click on the crown at the bottom left hand of the HUD you will be able to check your quest if you select the kingdom tab. It will show you your kingdom, current quest, and completed quests.