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When pick pocketing, do I have to pay attention to the surrounding NPCs(can they spot me?) or just the NPC that Im stealing from?
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Yes, you do have to pay attention to others, especially guards. Guards evidently have X-Ray vision
'cos they can see through walls! So make sure there are none about when committing your nefarious deeds.
Killing Ristezze is a bad idea IMHO, even after you've completed his Bessy Toon quest (
Don't give him the camera whatever you do!). He's a useful shopkeeper, and is one of the few that will give you decent money for things like geodes. You shouldn't really need too much money early in the game, and you can usually get by until you get to Tarant.
Once you get to Tarant you can make easy money, get your electrical skill up to the point were you can make Flow spectrometers (level 3, 111 Int needed) and Shocking Staffs (level 4, 13 Int needed), you can buy the components from the general store and Technical traders (like Riztezze) and sell them to scrap dealers (the Junk dealer in Tarrant, or Riztezze again) for a nice profit.
There are other tech items you can make that you can profit from as well, in fact most of them.
Two very useful spells to get early on are Agility of Fire and Strength of Earth.
Prowling, as I suspect you may have already sussed is rather difficult when you have followers, not only are they terrible at it, they also have the annoying habit of charging in and blowing your cover, and also depriving you of experience points! I've found followers a right pain in the derriere in Arcanum, necessary as walking backpacks, but constantly getting in the way, thank god for F5!
Backstab mostly only works if you're successfully prowling, and you have to be an expert in it (prowling) to have much chance of succeeding.
Spoiler highlight to read:
Once you get to Tarrant, visit the Panaari Temole, there's a very useful amulet in the chest, but you'll have to kill the priest to get it, and he can e tough if you let him get a spell off. End of Spoiler
Finally be aware that a lot of follwers will get annoyed and will trun against you and attack you if you attack 'innocents'. Virgil and Sof Mead-Mug won't care who you attack, but Magnus, Jayna and several others will.