I'm in the same boat your in. My 8 year old daughter is intrigued by the game but it's obviously a bit over her head. Anyway I may be able to clear a few items up.
Started a 2 player game with my son and a few things came up?
1) We didn't put the Dragon on his lair and the 5 tiles in the bag! Actually we did and then changed it when I remembered RotH rule of having to get the Nameless One out of the bag after someone completes a quest.
The dragon tile should be placed on the dragon’s lair (middle space on the middle tile.) at the start of the game. This differs from the having to complete a quest before putting the nameless one in bag as in RotH. I believe you can go after the dragon at any time.
2) Is the Dragon Man placed on the board also or how does he enter the game since it is necessary to defeat him to get to the dragon?
The Dragon Man is placed in the bag. You'll only have to defeat him before the dragon if his tile has been drawn.
3) Fear Dragon event? What's an "open counter"?
An open counter is any counter that doesn't have the "PA" on the back of it. The "PA" counters are just flipped over while the "open counters" are placed in the bag when this event occurs. I don't like the way this counter plays since it only serves to slow the game way down. I would probably replace any open counter removed from the board due the Fear event with one from the bag like you do whenever any other counter is removed from the board. This way things get mixed up a bit without necessarily slowing the game down.
4) Market is Burning event? What is the difference between "Market counters" and "City of Mages counters"? Is the market only talking about using the game as an expansion with RotH?
The "Market counters" are in the RotH and do not come into play unless you play these together. The "City of Mages counters" on the other hand are affected and you have to remove four of them when this event occurs.
5) S2 and Garbage Dump encounter? This is placed on S2 and let's you find a spell on roll of 1 or 2. Is that the main difference? Normally if you land on S2, you can look for an artifact with a roll of a 1. Do you just look through all the City of Mages tiles to pick your "yellow border" artifact?
I'm as confused about this as you are. The rules are inconsistent. I'm not sure if you can only pick through the dump when this counter is on the board or if you can do it any time. I favor having to wait until the counter is out.
Sorry for the rambling questions, but my 5 year old really wants to play this game some more and I actually learn best by being taught the game instead of trying to read the rules myself.
I hope my rambling this helps.
Heck Todd, I just realized you live in Geneva. I live in Naperville we should get together and game some time.