1) For ease of simplicity, it's not likely that people will assume right off the gate that you must have killed this animal to obtain the meat; perhaps you, too, have butchers where you come from! It's more likely to be a difficult item to sell. If the residents of Ai'tuoh don't recognize it, they probably wouldn't buy it - probably because, as you've guessed, they wouldn't want to get on the wrong side of the law if someone assumes they were responsible for taking that animal's life.

2) The docks do indeed contain NPCs that will be considerably more forthright to travelers. Security in the docks is also the lightest, and thus questions about the law are much less likely to be worthy of scrutiny or reprimand. There will be opportunities to interact with said NPCs for information!

a) Ai'tuoh's treatment of water would perhaps be most analogous to treatment of holy water. It is to be used for consumption and cleanliness only, and is to be disposed of properly - no tossing it out into the streets and treating it with disrespect. It is not to be played with, splashed around in, or, er...soiled with whatever crude bodily functions you might have. Most citizens of Ai'tuoh handle water in all forms with a certain form of reverence. Some of the more devout may be seen bowing or murmuring prayerlike epithets to jugs or basins, though that ritual in particular is more a gesture of respect than it is a concrete requirement.

b) What is the Standing Water, indeed. You'll just have to wait and see - though some of those docks NPCs might have more information on it.