doing quests, purchasing improvements, gaurding the villagers as they travel to town and back, and checking in regularly to make sure they aren't beset by bandits, as well as keeping enemy lords from raiding them are all ways to improve or maintain prsoperity, allegedly purchasing goods from them also improves their value, but i can't confirm this
unfortunately, they are all ultimately pointless. its far too easy to for a villages economy to tank, to the point of being a certainty. even if you pursue it to the exclusion of the rest of the game its likely your village will still decline in value or at best, not increase in value. its a lost cause, and not worth the effort. a prosperous village really doesn't grant much over a poor one, not to be worth the investment in time and money.
I would strongly advise against even trying, sure do the quests and purchase the improvements, but not to make them more prosperous, instead to increase relations for recruiting soldiers, to gain experience, or because the improvement provides a needed benefit.
you may notice NPC towns doing quite well and gaining propserity, unfortunately its because they don't play by anything close to the same rules as you. so you can't use them as an example. where the player is concerned, its not an aspect of the game that was ever completed.
as for the mill, i strongly recommend magelords list of 82 tweaks, one of which changes the mill to add 5 percent every month, instead of only once. but yeah, 5 percent of very poor isn't likely to change the welfare of the village.
mage lords tweakshttp://forums.taleworlds.com/index.php/topic,46290.0.html