Is אלא used only when the first part of the sentence is negated (like German sondern, Spanish sino etc) and אבל is a general but or are they used differently?
Sondern is actually a very good translation for אלא, sometimes I encounter awkward efforts to translate it to English and I'm like, what do you mean hard to translate? It's אלא!
ll אלא is used in a more specific situation when you want to express "not X but Y", the second phrase is true rather than the first. Sometimes it's translated "but rather". אבל is used in other situations as translation fo "but", for example, "I called her but she didn't answer", התקשרתי אליה אבל היא לא ענתה.
When I speak English, my native tongue, I say either 'but' or 'rather', not both, as they indicate here.
agree - sentence makes more sense using rather - we are not europeans, rather americans
In which case it really does need that comma after 'Europeans' (as indeed you've inserted). It looks odd, and isn't clear, without the comma.