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 :-)