Where and How do I put i NPC's?

Okay, series of question: 1)NPC's. I have no idea how to place them, needless to say where they are. Where are they? 2)How do is set where they go? 3)How do I incorporate a story? I mean, what do I have to do to make text, etc...To make a good game. 4)I downloaded some sprites, and when I try to import them, it says invalid image size. Why?

You how the game has three placement modes Event and then the two others ("you need to play around with those modes before starting a project" I think thats bluecubes words) Well in the event you can place the NPCs