I assume that ty bach (small house) refers to outhouses? is there a more modern term?
How would you refer to an actual house that is not large? If someone said, "Dw i'n byw mewn tŷ bach," would it be clear from context, or would people snicker?
I think toiled / toiledau can be used to mean toilet / toilets to avoid confusion.
When I grew up (southern England in the 50s) it was polite to refer to "the smallest room", echoing the Welsh phrase (very odd, since ours was a shack down the garden!
I started using "the smallest room" after reading the following quotation attributed to Max Reger (in translation) in response to a poor review:
"I am sitting in the smallest room of my house. I have your review before me. In a moment it will be behind me!"
How do defnyddio and arfer relate? When would you use one in preference to the other? Or are they interchangeable?
They are not interchangeable. Defnyddio is to use, and arfer is like habit or routine. Fel arfer - as usual / usually.