First time embarking upon this genre and game, it looks hardcore and difficult. Any advice? How far before I can find the Magic Atlas? And I'm thinking about reading the manual too. Love modern RPGs, but this looks kinda old?

I just need to get to that point where it "clicks" like it did in, say, Deus Ex after many hours.

From what I recall you find the magic atlas very soon. There's a little forest outside and that one mansion to navigate without a map, but it's all so small that you can't really get lost. You'll get the atlas after visiting these areas.

Personally, I think the game is indeed difficult, because the developers sure liked the idea of trolling you. Not sure why, because Eye of the Beholder 1 and 2 are fine. There are non-apparent situations where you can really make things difficult for yourself.
There's also the constant weapon swing misses that aggravated the heck out of me.

I suggest using a walkthrough, since you're not a diehard.

Not sure why you say you love modern games and saying this looks kinda old, since this game is indeed rather old. :)

The Magic Atlas is in the castle right at the start of the game. It is in the room with the books on pedestals.

Is the spellbook missable?

Where is it?

I'm not sure if it is miss-able, but it's at least retrievable before you sail out to another island. So don't sail away before you have it. Same with the compass, which you can get from some guy in the bar where you find Timothy. (Just click around in there.)
But again, before you can grab it I'm pretty sure you need to go to some guy's mansion first.

The game "clicked" for me, and I'm loving it! Sooo much personality, feels like Warcraft 2 or something (part dark humor, part epicness).

However, if I hadn't followed a guide, I would have missed the freeze scrol in the red dragon' caves, and you can't complete the game without it (need it for swamps).

Any chance you could run this guide through and see if there are other missable game-breaking items?

https://gamefaqs.gamespot.com/pc/564639-lands-of-lore-the-throne-of-chaos/faqs/50982

Stopped playing at Urkish mines, became tiresome.

Those are the Urbish mines, but yes, this is where the game gets bad. If it's any comfort to you: It only gets worse.