By "castle" I believe they mean anything with a hall/court, so both towns and castles.
And the difference between vassalship and being your own sovereign is once you get your first hall as a vassal, there should be a pop-up saying "do you want to hire..." if you say "No", then you're stuck because the only other way to hire staff is via your minister, and you don't have a minster as a vassal. So, say yes.
It doesn't make sense to me to have a constable without a hall and thus without a place to garrison. But, it might make sense to introduce some sort of back-up way to hire staff while one is a vassal.