Ive seen a couple peoples towns where they have a couple houses like their mayors house, but isnt their mayor. How do you make multiple player characters in the same town?
When you're on the main menu, instead of choosing the option to "continue", choose the one to start a new game. It'll let you create a new character in your town. You'll go through the train sequence with Rover like you did with your mayor, except that you don't get any questions about the town's name or map. Whenever you want to play with that character after saving the game, when you hit "continue" you can select any of the available playing characters.
If you decide that you want to delete that character, you can do it by choosing to continue with that character. When you're on the thing with Isabelle welcoming you, you can say that you need help first and there will be an option to demolish your home. That will delete that character (don't do that with your mayor because it deletes your entire town). You can also make a side character move to another town.
Does it help you unlock the fortune teller or do anything special faster? Or do they just take up space that a villager could be occupying?
I don't know about unlocking Katrina's shop (I think it counts, though) but there are several benefits. Side characters get their own inventories and storage so you can use them to hold items for you. You can also use them to hold patterns if you want a lot of them in your town. Some people decorate their houses to be like special buildings in their town. I think that there's also a trick about Gracie's fashion checks using side characters, and you can also get multiple items during events (or seasonal things that arrive in letters, like the things your character's parents send you).
I guess that whether it takes up space is just a matter of opinion. I've used side characters to hold spots in my town where I didn't want villagers to plot, for example.
It doesn't count towards the villager limit, if that's what you're wondering. You can have 10 villagers regardless of whether you have only one playable character or four.