It's been a while since I played it so some of this might be somewhat incorrect.
MP is morale points, which are used for abilities. If you don't have enough MP for an ability, you can't use that ability. Crowd appeal boosts your MP by an amount depending on your stats and equipment.
Killing vs. not killing is simply a matter of whether you want more MP or more XP. I don't think it's explained in the game, but killing probably riles up the crowd more and they get more excited, so your morale points go up.
There are two rows, front and back. The front row can attack both rows with melee attacks. The back row can only attack the front row of the enemy with melee attacks. Ranged attacks can hit from any row. And I think there's something else I'm missing.
