The Steam translation is applied as long as you use R4.1 or higher, so actual human translation. Pretty sure AI graphics refers to the actual game graphics settings and DHH refers to a mod that can enhance graphics and is said to be able to replace AI graphics with less performance issues.
No, the NPC to NPC interactions are limited to requesting H from each other.
Definitely buggy, just have to wait for those to be updated.
I have them all off and I'm still getting performance issues, the problem isn't the graphics, it's that the devs did a terrible job optimizing the game in general. Ditching the AI graphics and switching to the DHH mod's graphics has been said to help a bit, but nothing will get rid of it completely.