Steps one through three are what is called "seasoning" the pan. It's a process that often makes a bunch of smoke. Ideally, you only ever have to do that once. Cooking on cast iron doesn't produce a smoky mess.
IIRC (and I might not RC, I'm no food chemist) the coating is polymerized oil/fat and completely harmless.
I don't use cast iron pans because I believe they're less toxic, but because they make a damn fine crusty steak or fried potatoes.
And I use teflon pans to stir-fry or steam veggies and chicken, or to make fried eggs, just because they're more convenient.
To be honest, I don't really care all that much about potential toxiticity in cooking equipment. That wasn't really my hypothesis to begin with, I was just sharing my love for cast iron pans :-)
1. Scrub thoroughly using only hot water and a stainless steel pot cleaner -- this should give you a clean start
2. Make fried potatoes using lots of oil, fry potatos until black (throw them away, obviously) -- this should help soak the somewhat porous surface with oil
3. Apply a thin coating of oil and bring to immense heat -- this will create a solid surface
4. After every use, clean gently using only and old towel (or hot water and pot cleaner, if needed) and always rub some oil on it when dry -- this will give you a good start for the next heat-up
Please note that 3. will result in quite a bit of smoke from the burning oil, so you may want to do this on the grill outside your house.