1. it's all about the object center & layer order. The scene objects have to be ordered based on the object center values. You can automatically order them with the double yellow arrow icon on the toolbar above the scene object list.
Quick tip: An object center value of -1 will always be drawn behind the character sprites whereas an object center value of the scene height or scene height + 1 will always be drawn on top of the characters.
Quick note: incorrectly ordered scene objects can create weird side effects in-game.
As for the object center, it works by checking if the character position is above or below the y co-ordinate you specify. If it's above then the scene object sprite/animation is drawn behind the character, if it's below then the scene object sprite/animation is drawn on top of the character. The character position is based on the animation center you specify for each of your characters animations - ideally this should be somewhere in between the feet of your character & the animation center should be the same x,y coordinate for each of your characters animations (if you aligned them correctly in your image/3D editing software).
2. combined command doesn't actually do anything other than generate some action text by the cursor or in an action area box if you specified it should use rect on main game settings tab.
Dragged items doesn't actually mean left click hold & drag - I know, it confused me too - it just means if you left click on an item that it will add that items sprite as the cursor & that you can then use actions such as "item 'x' dropped" or "item 'y' dropped (immediate)" actions inside of scene objects to create events/make the protagonist do something if the specified item was dropped on the scene object.
Combining requires multiple different instances of items. The separated item & then the combined item. You need to create the same actions for the 2 separated items, something like... if item "rock" is dropped on "stick" or "item stick" is dropped on "rock" (in case other way around) remove stick from inventory, remove rock from inventory, add spear.
Sorry for being a bit vague. Cooking at the minute, but I'm sure you can figure out what you need to do.