The leveling curve tends to deposit most people in the teens, and most activity tends to revolve around that. A lot of events also aren't combat or mechanics oriented, so character level isn't generally too much of a limiting factor. Also, there's a reasonably wide level range supported for groups, so it usually possible to tag along even at the high single digits.
Another place you could probably try at that level is the Goblin caves in the Hullack Forest, east of the city. I don't know if there's anything in the city that points out that way, though there are NPCs once you reach the forest itself that talk about them. (That might be worth adding)
There is a second level to the abandoned farmhouse - you have to use one of the emote commands to jump across the rubble (using the /leap command, which is listed among the emotes in the journal entries).
As for activity, the early mornings tend to be fairly quiet from what I've seen, whereas evenings US-time tend to be when large numbers log on (24 online as I'm posting this). I'd prefer more people at off-peak times, but there's only so much I can do to alter schedules (especially when my work means I can only play in the evenings).
The torch thing is probably a bug with the tag of certain torches. Most people that I've seen tend to go a different route, either with using magic (such as darkfire or elemental weapon), or waiting until 6th level when they can purchase a weapon with fire or acid damage from the stores (as the shops increase the power of their wares gradually as you increase in level, so everyone has access to a certain basic set of level appropriate things, etc).
