Can we also say: Raj used to stay there?
Yes, you can say that.
Why not raj lived there
राज वहाँ रहा करता था
Why not "Raj was living there"?
A better translation for that would be — राज वहाँ रह रहा था (i.e. continuous aspect)
You can't say this , because it is not past continuous.
How about: "Raj lived there." ?
Why we not say raj live there
Then he took an arrow in the knee
How can i say raj lived there ? Can somebody plz tell me about simple past tense?