help with dual namespaces in cl

When do I use function? funcall? apply? It seems you can't use function out of the box, which is a pain in the ass because I don't see why there should be a seperate step to higher-order function application.

You missed one MULTIPLE-VALUE-CALL. Personally I like the separate namespaces as they help a lot with macros, and allow me to use any argument names that I'd like. You've also forgotten about FLET and LABELS.
Read http://www.nhplace.com/kent/Papers/Technical-Issues.html for a better understanding of the issues.
#'fun == (function fun) == function named by symbol fun in the current environment
And you use apply in Scheme too.

Is it really a separate step? If you have an argument, and it contains a functional value, what do you think the following code would do:

(lambda (list) (list list))
In a Lisp-1(such as Scheme), it will call the function located in the list argument with itself, in a Lisp-2(such as CL), it will make a list of the first argument. If you really don't want all the advantages that Lisp-2 gives you, you could just use a code-walker which lets you write in Lisp-1 syntax, there's a few out there.