At any given aperture and focal length, I can still focus on something near or something far away by simply touching the lcd on my dslr. Does that mean that because I may not be focussing at the hyperfocal distance my dof isn't at its premium value?
'Hyperfocal distance' is a distance and as such has nothing to do with the method of focussing. It is the shortest distance focussed upon for a given f/stop and lens focal length that gives depth of field to infinity (obviously focusing at infinity will also give depth of field to infinity). It varies with aperture, of course, for a given focal length, and varies with focal length for a given aperture. For example, with a 21mm lens focused at 4 feet, the depth of field may extend to infinity at f/11, but at f/4 it may not. At f/4 it may be necessary to focus at 10 feet for the depth of field to extend to infinity with that 21mm lens. In other words, the 'hyperfocal distance' in the first case (f/11) is 4 feet, but in the second case (f/4) it is 10 feet. The depth of field does extend closer to the camera than the focused-upon distance, but that is irrelevant for the purposes of discussing hyperfocal distance, which is the distance beyond which everything is in focus, and always extends to infinity.
Hyperfocal distance applies regardless of manual or automatic focusing. The hyperfocal distance is simply the distance at which (when focused on) everything beyond it is in focus. This is a set point for a given focal length, aperture and cone of confusion. It does not change regardless of if you focus manually or automatically.
Yes. The feature in the image that is focused on os the most in-focus distance, with some depth on either side being acceptably sharp. Having the touch-here focus is no different than using an old fashioned split prism: it focuses. Choose a feature to focus on that is in the middle of the intended depth. If you want to be sure, use the eyepiece (not the lcd) and there is a dof preview button. Or, take a photo and analyse it and try again. Or, take it off auto-focus after it focuses, and bracket the focusing a touch closer and farther.