As for feeding the cities, each city was surrounded by a "verdant belt" maybe 5 miles in diameter, with scrub plains some distance beyond that. For example:
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The original box also makes mention of rare storms in the Sea of Silt that spread a haze everywhere within 50 miles where you can basically only hunker down and hope you find shelter. However, given the small scale of the setting, that would hit every city-state other than Urik and Tyr. But I'll chalk that up to the designers not really considering how small they made the original setting. The distance between Urik and Draj in the picture above is about 150 miles (or 180 along the road). That's about the distance from Berlin to Hamburg, or London to Sheffield – some distance away, but not exactly the other end of the world.
But yeah, it's weird that in the Horrible Desert Setting, you get lots and lots of really big monsters. If you look at real-world deserts, that's not really what happens. Big animals are mainly found in areas where food is abundant, whereas deserts mostly have small animals that have an easy time feeding themselves.