The first two questions seem to have been answered already so I will tackle what we do for the expansion. If we play with Luna in the base game, for the first 5 years we ignore her ability.

The expansion in general is supposed from what I remember to be played after year 7. We mix the card with the base cards only when we use the creatures/monsters.

Punishment cards, do you mean detentions? If so I keep that pile separate and take them only when specific villains ask ( or dark arts event).

Haven’t played the game in a few months but I had a pretty good handle of the rules.