1. You can use existing locations as a setting but only those that are in the current build of the game. I have plans for the Lingrave Wastelands in the future, but for this round it will not be allowed.
2. As long as there is an option there (i.e. bad ending possibility) that is enough. The whole quest doesn’t need to revolve around it, but ideally you would want to make a scene that focuses on it, as it’s one of the game’s main appeals.