These are all good questions! Based on your description I assume you haven't had an introduction to solid state physics yet? Let's take your image of an electron that "jumps"
from atom to atom. In my understanding I wouln't describe it that way, to me it's a wavefunction of the electron that is almost independent from the valence electrons and you
can use the free electron gas approximation. Why is this band independent? See the following picture for an intuitive understanding how the atomic potentials define the possible energy levels within a periodic arrangement of atoms:
I think most of your questions will be easier to answer if you make yourself familiar with basic concepts and approximations people use to describe electrons in a solid first. Sure, a lot of things can be understood if we consider electrons to be little spheres that scatter from bigger spheres (ions), but you said you want to understand on the atomic level -> it's good to see the electron as a wave and see how this wave behaves in a lattice with certain boundary conditions.
First, I would read about a crystal. Atoms are arranged in a periodic lattice (assume a nice crystal for a first simple picture) and you can make assumptions based on this periodicity. You can define a unit cell and the Brillouin zone. You will see that the energy levels will sometimes split up in different bands and based on the filling of these bands you end up wih a metal, insulator etc. Electrons are fermions, can two electrons be in the same state? This defines the Fermi velocity.
This filling of the available energy levels describes the Fermi surface, a very useful tool
to describe other more advanced concepts. Then you will see what happens if you change the arrangements of the atoms or why in different spatial directions electrons can move due to the bonding of different atomic orbitals.
This could be a good start ; ) ->
http://britneyspears.ac/lasers.htm
There are other introductions out there, most of them describe the basics really well.
Many of the things you write sound OK. But I wouldn't say that the other directions in the graph are mere strengths, they indicate the actual value (strength/magnitude and direction as well) of the electric and magnetic fields.
First note that technically the electric field is a vector and it is a field so it should have a vector (possibly zero at every point). Each vector has a head and a tail. You can think of the location of the tail as telling you the place where the field has a particular value. Then you can think if the difference between the head and the tail as telling you both the magnitude and the direction of the electric field at that point, in some specified unit system. So imagine a bunch of arrows all the same color the location of each is telling you where it is telling you the field and how the arrow points from there tells you the value.
Then draw the magnetic fields in a different color. And in both cases you can't draw a vector at every single point because it would just be too much to see them all.
For a plane wave traveling through vacuum there is a great deal of regularity.
If the wave travels in the x direction then the electric and magnetic fields all point in the y-z plane. And their values only depend on time and on x, so you can draw just one longitudinal line and it will tell you about all of the values at all the locations. And since the electric fields and magnetic fields all point in the y-z plane you can reimagine the y-z plane as like the independent axis of a graph.
And for a classical plane wave travelling through a vacuum your picture should have the electric and magnetic fields both be strong together at one plane of a fixed value in the longitudinal direction and then at a different plane corresponding to a different fixed value of the longitudinal direction. Strong together and weak together and then strong again but pointing in the opposite direction.
If so, you get a picture much like the first one you drew (though that is just for one the electric and magnetic fields, a wave has both). That is all fine for a classical wave travelling through a vacuum.
For your other questions I think you should look at existing questions about the different topics.
From a quantum perspective it is much more complicated. From a quantum view there isn't an electric or a magnetic field, there is a photon field. When you have a large number of photons all in phase with each other it can look or act like an electromagnetic wave, but it is still different, and if you have a small number or they aren't in phase then it just truly different.
The electric and magnetic fields classically are stand-ins for saying how charges interact (though they do have their own energy and momentum, pressure and stress, etc.) And in quantum mechanics different interactions are possible and so the photon field is a stand in for saying how those different interactions go.
Since in quantum mechanics the charges don't have a location and momentum saying that their momentum changes based on the field where the charge is located just isn't going to be possible because you have none of those things. And if you can't verify the field's values at any location it becomes difficult to say it is there in that way.
We make the objects we need to predict results, for quantum mechanics we need different objects because we are predicting different interactions. Only in some limits (that only hold sometimes) do we expect quantum mechanical effects to start to approximately look like classical effects.
As for a transverse spacing in a Faraday cage stopping a wave that varies only in the longitudinal direction remember that you were drawing only the simplest case, the case of a plane wave.
In a plane wave the entire plane parallel to the y-z plane has the exact same electromagnetic field. This very simple (to describe) solution allows the wave to travel entirely in the x direction, over time each part of the wave simply slides over, the new value at distance $x=x_0+\Delta x$ over is the old value at $x_0$ a time $\Delta x/c$ earlier.
But no real wave is ever that perfect. They might expand in a spherical front instead of a plane front. They might have a central region where it is strong and it gets weaker farther out (like a Gaussian beam) some people even make beams where the energy and momentum travels along a cone so there is a central strong region but if you place a small object there the region beyond it still gets light because the light from farther out came from a base of the cone that started out farther from the central region.
Sort of like if you had some racers all lined up for a race but instead if running in their own tracks they ran towards the same point that is in front on the center runner. The center runner gets there first, but if parts of the center of the track are damaged the runners that left later will eventually close in and it won't matter that that the runners originally closer to the center got affected.
So a real wave has a more complicated wave front. And in fact if you are trying to avoid the wires of the Faraday cage you need your beam to be focused to not extend out too far in the direction transverse to the direction of propagation. And this isn't restricting the amplitude, this is saying that the actual wave shouldn't have field values spread out in the yz plane, it should be focused to a small portion of the yz plane.
Imagine you shot narrow beams all towards the same hole in the Faraday cage, you need very precision aiming each point has to has "its x" aimed very precisely to get in that same hole.
In general if you aim your initial propagation directions with accuracy on the order of the wavelength then you gave changed the wave.
Thus is because the direction of propagation isn't a magic thing you can freely associate with a point. It depends on how the electromagnetic field varied in space. When you field didn't vary in the y and z directions then the field travelled in the x direction. Now you are trying to get each region to aim slightly differently so you try to adjust the electric and magnetic field here and there to have each part aim just right.
Waves tend to spread, so if you aim some at that one whole, lots will be lost in other directions and what aimed well for one whole is nor going to aim for the other holes, so the Faraday cage succeeds at blocking almost all fields coming at it assuming the cage is big enough to have many many holes.
I think many of these question can be (and have been) asked as separate questions.
Best Answer
Your description is ok up through here.
I assume by "free space" you mean the space surrounding the wire. This is already problematic since there are no free electrons outside the wire.
Let's simplify things and put the circuit in a perfect vacuum. Electrons oscillating in the circuit will still cause electromagnetic waves. So there must be something else going on.
As I hinted at above, the electromagnetic wave is not carried by moving electrons.
What happens is that an oscillating electron generates an electromagnetic wave, made of oscillating electric and magnetic fields. As the wave propagates through free space, there are no electrons involved at all, simply the fields jiggling around, following Maxwell's equations. Far from the circuit that generated the wave, the wave propagates like this picture from wikipedia
with the electric and magnetic fields perpendicular to each other, and to the direction of motion of the wave.
Eventually, the wave may interact with some charged particles, like electrons and the energy in the wave absorbed by the particles. In that situation, the electromagnetic wave will cause the charged particles to oscillate.