Borderlands – Can artifacts gain levels and if so, how

You do get way less experience for killing things with the vehicle vs. killing them while on foot. I'm honestly not sure about the quality of drops being different. But in my experience playing, if I cared about xp at all, I always stepped out of my car. I don't remember really specific numbers off the top of my head, but for example, killing a Badass Spiderant King with the vehicle awareded me half (less even, I believe) the xp versus stepping out and shooting it. This is not a bug and is working as intended, so you can't just cheese your way through the game.

Later on in the game, enemies will tend to do too much damage to your vehicle too quickly for it to be useful for seriously clearing out areas. If you're just going from point A to point B, sure, you can often run over whatever you want on the way (keeping an eye on vehicle health of course). I would park it outside of a hideout though if you're going in, as enemies will chew through it fairly quickly later on and it'll explode, leaving you pretty damaged, if not already on your knees needing a Second Wind.

Also, when you start your second playthrough, the enemies damage the vehicle way more when you run into them and will sometimes explode after hitting one enemy!

A melee attack is, well, a melee attack. You hit the enemy with a knife, bladed pistol, the butt of your gun, or sometimes, your fist. Brick and Lilith make use of melee the most, mainly because it's part of their special abilities. Doing a melee attach while in phasewalk (Lilith's special ability) will end phasewalk early, and can deal extra damage, if the right skills have points in them, and can also do some other stuff like daze enemies.

Basically you'd use melee in Borderlands like you would any other FPS: use it when you're close enough to hit them. On the PC, it defaults to v, on the console, it defaults to pressing the right stick.