Thank you to everyone for the time you have taken to write such
detailed replies to my noobish questions.

I have also found another tool which seems to be interesting and very
inexpensive: http://www.engadget.com/2006/03/07/how-to-make-a-surface-mount-soldering-iron/

Also, since solder paste is expensive and doesn't keep well, (how long
does it keep anyway? in the fridge, that is), would it work if I were
to pre-tin the pads on the PCB by putting solder already on it, then
using the above tool to literally melt the solder as I place the
component on the pad?
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