Yes. 이 ≈ este, esta 그 ≈ ese, esa 저 ≈ aquel, aquella. Adding 것 to the end of any of them makes them pronouns like esto/éste/ésta, eso/ése/ésa, and aquello/aquél/aquélla.
You are right. 저 means both the pronoun "I" and the demonstrative article "that (over there)". Surrounding words make clear which one is meant since they're two different types of words.
This one does! 저 is far from both the listener and speaker. And could be translated as that over there.
Any reason why "Those people" is not accepted? Would that be 저 사람들이 instead?