1) So basically basic training, do you think town guards should get EXP from their regular training? I mean that is typically one of the reason why guards are a higher level than the farmers, the other part, of course, in that they have to put up with dangerous situations. But what they deal with on a regular basis is not going to be as dangerous as their training. So with how you are going to train them they might start out decently high but plateau pretty quick.

2) No, training for combat is brutal anways, just because now you are purposely trying to kill them whilst in training really doesn't make that any more or less psychologically worse.