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Bark Horrors have been reported to show up in Talrik's area - very rare but it can happen.
1) Oakenmir's part in the game was probably cut out when the game was rushed to market. They probably had something much more interesting planned for him beyond being a very neat creature to meet and learning some more information about the game.
2) already answered
3) To prove the leprechaun exists and satisfy the quest, you have to enter Anephas' Tomb, find the area where you can talk to Kerah, swim out from Kerah's area to the surface which is where you will find the chest containing the proof.
Wyv
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