Private and federation are mutually exclusive concepts. Private instances are ones that intentionally don’t federate - like a private company community that’s locked to their intranet. For self hosted Lemmy instances you just need to close registration. Then since no one can apply, the only use case for email becomes the Forgot Password button for if you forget your password and at that point you’re better served with a password manager.
I’m by no means an expert, and have a similar amount of play time. I opted to push through the main story since all quests scale the same and you need to get to Act IV to unlock the horse.
I’m just now doing some of the 50-100 stuff and while doing that I’m going through and getting some more of the flavor by doing side quests in the areas that I’m spending time in.