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I'm assuming they still give upgraded pop growth.
You can check what it does in the settlement page. When you move your cursor over the symbols it says (Farming). Income depends on whether the harvest is good or not(which I think is totally random), growth stays on through the whole game. Because farms improve the pop growth, it increases the pop and so it increases the rate the squalor grows.
In Med2, the only time I go above tier two is in castles.
Almost. In BI there are events for bad harvests which "help" the WRE to collapse.
In practice the effect of bad or good harvest is small.
Trade is what matters more and since letting a city rebel (for the purpose of extermination) will cause a serios reduction in trade it tends to be wise to not go down that route, at least in places where corruption is low. At the outer rims of your empire the calculation changes.
This is not true at all. Population is determined by buildings and harvest, not by anything else. Better not exterminate unless you need the money and/or maintain public order.
I think you did (Red Spotted it as well). Please elaborate your point as I don't understand what you mean.