#1,2,3: Templates just give you the base powers for what you might have in the novels. They help you to build characters within the setting. You want to be a Wizard, you need to have those powers at minimum. With that said, representing a biomancer with a toughness power is perfectly legal. Most people eschew the templates, use them as guide-lines and take the powers they want that represent the character they are trying to build.
What is important when buying powers and maintain balance is this:
What is the character's High Concept?
How does a given power fit the concept?
Does the character have an aspect that covers a given power?
Remember that many powers need an aspect to go with it. Toughness powers, are one of them because they involve catches and compels. Why does your pixie thief have Supernatural toughness? It has to make sense.
#4 City building is very important.
City Aspects can be invoked or compelled at any time and the players should have a say. It's the equivalent of asking your players, "what kind of game do you want to play? exploration, investigation, dungeon delving?" City themes and threats frame this question.
Typically, I ask every player to create at least one NPC and one Location, along with aspects. More is o.k too. It gives them an NPC to tie their character into the 'city.'
I then add a few others but it's never an exhaustive list. There are always unknown NPCs and locations.
Example (using Fantasy D&D - Ravenloft)
Your players want to play freedom fighters in a country that's been taken over by a tyrannical Necromancer.
City Theme: Uprising against the Rising Dead
NPC: Emperor Zulu the Undying
Threat: Undead
Aspect: Beware the Night
Locale: tavern
NPC: Bob the Bartender
Aspect: refuge against the Dark
There's a super rough outline. The Players come up with a few villagers, a Fence, a Good Cleric in Hiding etc...
Meanwhile you outline a few organizations that the players would run into: Evil Clerics, Emperor's guards etc..
You don't need to outline the underbosses and stuff. Those things are secret. But the players have enough with the City aspects to compel the underbosses if a fight comes up.
Maybe they are wanted and they run into a Head guard underboss and are about to be arrested. They invoke 'beware the Night' to say that zombies shamble out of the alleys forcing everyone to run away, allowing them to escape.
Anyways, sorry about the long post - I hope you get the idea. Also, welcome to the boards.
Edit:
but I'm trying to figure out how much info the players should be given out of character about the motivations of X, or the reason that Creepy place Y is the way it is.
I don't think you have to give it all away. Creating a place for them to explore and putting an aspect on it is usually enough. But sometimes the player will come up with a super-cool idea for a place or NPC that you never thought of. Or they might hang a juicy plot hook for their character on it. These are the kinds of opportunities that city building creates.