1. Metal lathes are incredibly useful for the tasks for which they're designed. There are some turning jobs you could do with, say, a drill press, but for precision, consistency and ease of production, nothing can beat one.
2. I own a Harbor Freight 7x10 lathe. It's plenty for the kinds of small hobby projects I do. I have changed the handwheels to a set from MicroMark, which have accurate .001 inch markings, which the originals did not. Before, I had a Taig Micro Lathe, which is a simple, inexpensive machine that will do small jobs well. It's not much on material much over 1 inch diameter, however.
3. I prefer to work in brass. It's weighty and substantial, which is a plus in the kinds of projects I do, and it's very easy to machine.
4. I have not machined wood, and it's not advised for metal lathes because the sawdust gets into crevices and the wood chemicals can corrode precision surfaces. That said, I know that there people do use them for wood, presumably with a good vacuum attachment and fastidious cleaning.
5. I had a milling machine before we downsized. Like the lathe, it's a wonderful tool to have when you need to do what mills do. I paid for mine about a week after I got it, by reproducing a part that broke on our home heating furnace. The unit was old enough that we would have had to replace the whole thing, at a cost of probably 5 times what I paid for the mill. That convinced everyone in the house that it was a good purchase.