So in terms of drops, I 'hit' objects by casting a flame spell on it - is this the correct way to collect things? I thought maybe I was doing it wrong when mushrooms weren't dropping anything, same for random furniture in houses (like closets and stuff). Chests and rocks and some trees drop stuff though, just checking I'm doing it right.
Yep. What you're arguing with there is what's considered a background object. Only certain spells will hit those. After the first settlement you'll probably be best off using one of the whips (miasma/leafy) to chainsaw the background trees and the like.
Most background stuff actually won't drop anything. If it can, it *will*. Don't waste time wailing away on background stuff that didn't drop anything last time.
If you pause, you can hover over the background objects and find out what they are. Eventually you'll learn to see them on sight.
I'm only a couple of hours in, and a slow player so only explored a couple of places - it's such a detailed game though, much to learn. I look forward to reading through these forums to look what to expect in updates and view tips - are there any decent 'Lets Play' videos going on that are worth a watch (and to get tips from)? I hear you can build villages and stuff, though I reckon I'm miles away from that stage of the game.
I haven't seen a good Let's Play game. I've debated on doing one but haven't yet. Most miss the point that I've watched, even the 'praised' ones.
As to NPCs and city building, literally: DON'T worry about it. No, seriously. You honestly don't care unless you can't do something you want to. The city affects your guardian scrolls and which ones you can use (buoys and windshelters are the ones you truly care about, everything else falls under the heading of "Handy"). The Second Continent when you don't have everything you need and you have to work through building the city to finally drop your first windshelter will actually teach you a ton about what's actually going on there. In the first continent it's basically a too much information, screw it, don't sweat it. Here, have what you need.
I've not "crafted" anything yet, though collected some stuff. I've miraculously got about ten spells to choose from though, do they get automatically learnt? I thought you needed to craft new spells. I'm gonna read the encyclopedia tonight to learn more about the game tonight...
You get a wide variety of spells really quickly after the tutorial so you have a decent base to experiment with at Tier 1. The entire purpose of that is to help you decide what you want to craft LATER. If you hit the encylopedia, you can see what spells you can craft eventually. If you click into those it'll tell you what you need to go to Tier 2 (and eventually, 3 4 and 5). Right now it's a case of equip everything and try it all twice.
Regarding your last question of your gf playing with you on a LAN server: AFAIK you can't, the game tracks the keys and players logged in by key (and then name, but key is primary importance). I don't know for sure though.