The answers to both of these questions can be found pretty early in Chapter 1.
The country people who come to the Admiral Benbow see the man's stories sort of like we see horror movies. They are revolted and frightened by all of the man's tales of his days as a seaman. But the people also really liked to come and listen to the stories -- they were fascinated.
When Dr. Livesey meets the man, he kind of stares him down. He refuses to be quiet when the man tells him to, he calls him names and he threatens to have him be hanged if he does not put away his knife.