The simplest "hello" that works with Quartus and ModelSim

Its not quite the minimum. YOu could remove hello.v altogether.

I dont know what dummy is. It clearly does nothing.

Im not sure you really understand what quartus does. It takes your HDL, and converts this code into gates and registers. System calls like $display and $finish are for simulation only, and hence, as you saw, quartus ignores the. With dummy as it is, it means your file will compile in qurtus into absolutly nothing, as it contains no register or gate descriptions.

So, in answer to 3, yes this is the intended behaviour in simulation. And it is the intended behaviour for synthesis also (ie. generate nothing).