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They really seemed to want players to make it their personal home, being a very small settlement just outside a large one. But.. ya, it's junky, and uncleanable without mods. Which badly limits what you can do with it.
I've Read, that it's recommended to build a floor/base to build on, high enough to go over top a lot of the objects on the ground you can not remove. If someone wants to build around the over pass.
If Castle had more space I would suggest there. If the tunnel was considered part of the Castle and you had more space to farm and easier access to water (and could repair those walls better). It would be perfect.
The thing about Castle is that it come with a special vendor that sells the best gun in the game (including legendaries, for the most part). This would make it the ideal settlement if you can get around the space issues.
But after that one settlement, scrap the whole thing. You have your house and the shops already and the settlement system itself is crap, so don't bother with the rest. That's my advice.
Not to mention at one point in the game you actually will need a settlement of some sort to help you build a device needed for the plot.
PS.
To be honest I wish I could find a way to keep other settlers in my settlement out of the building I made for myself.
Bases to operate from (esp in survival)
Farms
Trading hubs
Decide which role each settlement best fulfills and build it to meet that job. Some settlements are too small to make good farms or trading hubs.
For all settlements with people in them you need 1 food, 1 water and 1 defence for each settler in addition to a bed. Build a restaurant in each populated settlement to keep happiness stable.
All your shops share each shops inventory so building armor / weapon stores everywhere is only good for income, not convenience (if you bought all the .50 from one shop all the shops are out of .50 bullets).
In large settlements or farms build a clinic as well as a trading post. You can build the gamut of shops in large settlements to generate caps, but i've never had such a problem with income to justify the expense and time.
Brahman and guard dogs count as settlers. Put a brahman feeder down to keep them from wandering all around the settlement.
Don't forget to build salvage stations in all your settlements.
If a settlement isn't producing its minimum requirements for food and water it will leech off other settlements that have a surplus as long as it is connected with a provision route.
Guards you post at guard stations will patrol from station to station.
You can also buy raw resources, such as shipments of wood or steel from some vendors, but can be somewhat pricey at first unless your charisma is high and/or you have the right perks that lower prices at vendors. Connie Abernathy at Abernathy Farm aslo sells shipments of wood.
Get some settlers, build scavenging stations, let them work. They will each generate two random items per day. Each unassigned settler will generate one random item per day.
Mind, that the workshop has a limited storage capacity.
Buy shipments of Steel from the merchants. They're kind of expensive, though you can self-finance through the Water Pump "Exploit" by just producing tons of surplus.
For example, in Vault 88, ploping down a few T1 traders and then rigging up the Vault Tec Water Pump should provide you with unlimited resources to build, as every day you'll refresh a huge amount of Surplus water, which you can sell to your own stores and buy shipments of materials from. (This works in every settlement with ample water or room for ground pumps, but Vault 88 is the most intuitive)
As for actual building tips, I don't know how much help I can be. I'm very much in the mind that you should always try to create as natural-looking a structure as possible. IE: Something that looks like it was built by the developers, and not you. So my builds wind up looking kind of pedestrian, such as my Hangman's Alley Favella.