Instead of iron/stone/wood, you use flint now. You can get flint by smashing gravel, but it only happens occasionally.
You can also use your last ingot of iron with a flint to make a fire-starter thingy. Put them diagonally from each other and have fun with fire.
Last night, my cousin told me that I randomly stood up, stared at the wall for 5 minutes, and went back to sleep. That's some Paranormal Activity shit right there.
For your mob problem: Build a moat! 3 blocks deep should do it. If you can, make a current going into your house so any drops from drowned monsters and animals come straight into your house.
Gardening problem: That's exactly what you have to do. Just keep scratching at the ground and eventually...
That is one huge ass cliff that you live on O.o
Also: You should invest your time into steel doors. Your house is pretty reinforced against attacks, but your door could be destroyed in the blast.