Considering the called shots, here's what the manual says:
The player may also choose to perform a “Called Shot”, deliberately aiming for the head, arms or legs of his intended victim. Called Shots are more difficult to perform than ordinary attacks, as they are less opportunistic, and thus a certain penalty is incurred. Any Called Shot which does connect with the target, however, has a greater chance of being a critical success, and when such critical blows are delivered the Game makes use a special table to calculate damage, this damage based upon the location of the wound. Called Shots to the head have a greater chance of knocking the opponent unconscious, while Called Shots to the arms and legs have a better chance of causing crippled limbs. Armor worn in those areas will help protect against these blows, which is why it is always a good idea to wear helmets, gauntlets and boots.
The basic idea is that they're harder to pull off, but if succeeded they have a greater chance of being a critical hit. Called shots to limbs also cause injuries.
In general, criticals are calculated using several parameters. A creature's body type and a weapon's critical charts are taken into consideration. However, it's never explained how the engine handles this.
Also:
Firearms Expert – called shots are made with 2/3 the penalty
So, this is especially useful for gunslingers. And this is true, my gunslinger character, who was a master of firearms, was doing a lot of critical hits when he was aiming for the head using his Looking Glass Rifle.
About the Dog. There's no two weeks limit. The script sets in motion the first time you visit Ashbury. E.g. if you arrive to Ashbury and wait a day there, the Dog will be most likely beaten to death. So, feel free to go there at any time, but be sure to free it immediately (even if you don't plan on taking it to the party). Also, as a monster type creature (an animal in this case) the Dog gains automatic Melee skill (and only Melee), it doesn't need to put CPs in it, as it's gained automatically based on its DX. And the training is received based on its level, so the Dog becomes a Master in Melee around level 30 IIRC. The Dog is a slightly modified Brute Fang, so it hits 30-40 of normal damage + ST damage modifier, thus hitting 50-60 when it gets ST20. A bit overpowered.