1) With allies, am i correct to assume they can participate in combat just like regular characters? This would also mean tapping the ally to give +1 combat bonuses to other characters, roll for ally body checks if they were wounded etc.
Generally, yes. Some allies (Goldberry) have no stats, thus can't fight, but can still support.
2) With the Ahunt Dragons - Does the party have to be in one the regions listed on the ahunt dragon card for the card to be played?
Because these are long events and not creatures...there are other cards that can make long events stay around longer than normal.
You can play them assuming you haven't reached hazard limit.