the names every individual has are different, they vary from names that relate to their occupation or purpose in the story or a minor quest (for example, Bill the Banker, Father Sarducci's Father, etc.) and are accepted as their full names. Some Avatars have short real world names (Adam, Frank, etc.), and some have typical X-Box Live Gamertags used by many players in the real world and sometimes referance real games (xXXHALOFAN117XXx, xXxKilla789xXx, etc.).
NPCs don't do much outside of scripted wandering or standing directly outside or near their homes and camps, waiting for the player(s) to assist them by issuing quests to the player, actions such as later game army recruitment, or simply giving the player gifts just for talking. Major NPCs such as Mayors and Lords will give you quests pivitol to the advancement of the story, the mayors of major towns or cities (Hub Town, Barkers Town, etc.) usually assign 3 Major quests at a time, which may lead to other towns whose mayors would assign extensions and furthur detail of the current quests, which upon completion, completes one of the three quests previously assigned to you. A few NPCs live in tents or huts outside major settlements, still handing out quests. NPCs do not fight alongside the player character, in fact, one of the reasons they hand out quests is because monsters bar their path and is too dangerous to do themselves, necssitaing the need for the player's assistance. Even ex-soldeirs and Prisoners of War won't help in the fight.
Almost all NPCs have jobs that sometimes lead to their name, some have adapted to life in the world and have become bankers and shop owners. Some shop owners include Weapon merchants, who sells swords and axes, Magic dealers who sell magic, usually improvements, Bakers and food merchants, who sell healing equipment, and traveling merchants who can sell anything anywhere if found. Personalities differ by avatar, as they do in other avatar. Some merchants have no purpose other than advance a quest plot. Archeaologists, who are found in Overworld or Path maps usually have a quest for you such as buried treasure or other quests.