Fighting Looters is used to help you get started skilling up. Once you've progressed and have some followers, then you should be moving on to the Forest Bandits, Tundra Bandits, then the Sea Raiders. How fast you progress depends on how good of a fighter you are. I've played this game for a long time and I'm still not a very good individual fighter, but I'm very good at commanding/training troops, so that's what I end up doing. I get my Companions and a few recruits, do some basic training at the Training Grounds, then use them to do my fighting.
For someone who is a natural at fighting, they would kill all of those bandits themselves. It all comes down to your playing style. Or you could gather a large group of recruits, then be a Trader and make your money that way. Hire high-end Mercenary troops once you have the cash and then use them to do your fighting to get the group experience going.
As for why you aren't seeing massive numbers of Looters roaming about, they are there, but widely scattered and spawning in certain locations. Vaegir territory is best for Tundra Bandits, along the coast for Sea Raiders, around Suno for Forest Bandits, etc. You can usually find one or two bands of looters in each of those locations, but they typically won't walk up and say hi to ya.
Also, once you've taken the local looters out, it typically takes a few days for them to re-spawn.
Oh, for those Quests, all Quests are on an individual timer, once you do one type of Quest, it takes anywhere from a month to several months until it re-cycles. The exception I believe is the Caravan Quest, there will always be one of those. The 'Talk to two Lords about ending a War' has the longest re-cycle timer. As to you not getting a new quest for a Guild Master after failing the bandit one, try reloading or try another GM. Might be just a fluke with your game that one time, or you might have changed something with TweakMB without noticing.