Good questions! I will ponder whether I put some more information about those in my guide. For now allow me to have my take in attempting to answer those questions of yours!

The story realms are indeed easier than the tutorial realm. The tutorial realm resembles more an open sandbox in easy settings while the story realms are actually scripted to be easy. I would say the designers had originally only the initation realm intended as tutorial. I too feel that it seems somewhat out of order, or even unnecessary if you just play the story realms. But then some players might not start the story at all.

On the long run it is only the city cap which puts the greatest weight what to do with a conquered city. In short term it is playstyle dependent with these three main options

Absorb it into your empire, gaining instant access to the conquered lands but eventually leaves you with a lot of work in repairing and defending a weakened part of your empire. In worst case it is so badly managed that it will strain your economics early on, making it not worth without a large investment to keep the city.

Vassalize it, is the comfortable method. You get lowered income and no control about the kind of income it can produce for you, and it would not work as "recruitment center" like an actual city you own. But it is often the better choice unless e.g. you want a recruitment/teleport center at the frontlines during a war.

Raze makes only when you have to worry that the enemy might conquer it back and you have no means to hold it, or when you follow an aggressive playstyle which is accompanied by chaos perks which gives you extra benefits.

For example there is one perk which gives you +20 permanently gold income. Even if the city gets rebuilt by the enemy, razing it again and again and you get additional income no one can take away from you in addition to the boons an evil alignment brings.

When absorbing a city there can be the question: why should I choose which race to settle there? That would make only sense when you are the keeper of multiple races with multiple traits you want to prefer. E.g. your tough orcs make good brawlers, while the elves you conquered have keen sight, making them better archers. So you want to be able to recruit archers from their race when you can, while your defenders and shock troops are your standard orcs. Cliché, classic, but that is how it is.

Keeping the other NPCs friendly only works when you actually ally yourself with them with allied victory enabled. Otherwise it is standard gaming principle. Like when you play Risk without teams. No one can afford to let anyone win, and the moment someone is close to victory they become naturally prime target for everyone else.