You can't buy Eurrail passes in Europe, and you have to be a resident of Europe to qualify for the discount fares available here (Interrail for example). However, you can buy point to point tickets anywhere, if you find yourself without transportation. Sometimes there are cheaper deals (taking slower trains, traveling 2nd class, or sometimes there are weekend passes), or you can take buses which are *sometimes* cheaper than the train.
There is at least one tpunk who has arranged farm work stays during a trip - check out the "Working Abroad" forum for some suggestions, there may be links in there as well.
Busking is performing street entertainment - playing an instrument, singing, doing puppet shows, etc. We were delighted one day on the metro in Paris, a guy got on and set up a little puppet show at one end of the car. Just puppets and music, very simple. The kids were entertained, and then amazed that the guy scooped up his equipment, passed a hat, and got off the train in seconds flat. It's probably illegal, but it sure was fun.
I dunno about the flag issue - to be honest, I haven't noticed a lot of people with flags (of any country) on their packs the past couple of years. Based on our experiences living/traveling in Eastern/Western Europe these past three years, I'd guess you're more likely to get a negative reaction to being American in some parts of western than in eastern Europe, though I wouldn't really expect hostility in western Europe, either, unless you get obnoxious in a bar (actually, that would apply in eastern, as well.)
My husband's in the US military, and we occasionally hear stories of service people getting beat up, robbed or whatever, but strangely enough, there always seems to be alcohol involved in the story... Hmmmm.