1.)  It's never explained why Rider left: like the father of Alwin Arundel Lowdham in The Notion Club Papers he enters the enchanted realm and never returns.  But other characters in Tolkien's works get similar chances: think of Bilbo, Frodo, and Sam.  In their cases we know why this privilege was granted them; but in Rider's case we never find out.  The reason is simply this: this is Smith's story, not Rider's.  (Whether or not Smith's mother knew much about her father, she may simply not have spoken much about him to Smith.) 

2.)  The King of Faėrie is doing for mortals what they should have done for themselves -- or rather undoing for them what they should never have allowed to happen.  Given that the Great Hall represents the village church, this seems a bold gesture on Tolkien's part; yet it is clearly in line with his statement in "On Fairy Stories" that "God is the Lord, of angels, and of men -- and of elves."  Elves are just as concerned about these matters as Men. 
     I've earlier suggested that Tolkien, who regretted the changes instituted by Second Vatican, may have longed for a change back to the old ways. 

3.)  Hmmm...  Perhaps it was just the pungent spices which brought tears to his eyes?  I'm sure I'm not the only one who cries when he's cutting up onions or the like...  So, in this case, perhaps a cigar is just a cigar? 
     Still, returning the star is for Smith a moment of great sadness; and since the star has been a light to him for many years, that he should not be able to see without it does not surprise. 

4.)  I'd suggest it means both. 

5.)  Increased knowledge may make any decision easier -- or more complicated.  But the point is this: Smith must give up the star, of his own free will without ifs, ands, or buts.