I think it would be good to talk about structures explicitly in your question since we're talking about first-order logic. The non-logical symbols are always given an interpretation there. When you introduce a new function symbol, even if there's exactly one denotation that it could have, you're working over a new structure.
Structures are the setting where we assess the truth of a particular well-formed formula. They are the $A$ in $A, \vec{v} \models \varphi(\vec{v})$ if you've seen notation similar to that before.
A first-order structure $A$ has a domain, a set of objects that form the universe of discourse. It also maps each $n$-ary relation symbol to an $n$-ary relation on the domain of $A$ and maps each $n$-ary function symbol to an $n$-ary function on the domain of $A$.
Let's let $\mathcal{M}$ be a collection of structures. Let's also say that $\mathcal{M} \models \varphi(\cdots)$ if and only if it holds for all $M$ in $\mathcal{M}$ that $M \models \varphi(\cdots)$.
Let's call our language $L$.
Let $\mathcal{M}$ be a collection of $L$-structures.
Suppose that $\mathcal{M} \models \forall x_1 \cdots x_n \mathop. \exists! y \mathop. \varphi(x_1 \cdots x_n, y)$.
As it stands, $\mathcal{M} \models \forall x_1 \cdots x_n \mathop. \exists! y \mathop. \varphi(x_1\cdots x_n, f(x_1\cdots x_n))$ is neither true nor false. The formula to the right of the $\models$ is ill-formed because $f$ is not in $L$.
Let $L''$ be $L$ extended with the function symbol $f$.
The fact that $\forall x_1 \cdots x_n \mathop. \exists! y \mathop. \varphi(x_1 \cdots x_n, y)$ holds in every model in $\mathcal{M}$, though, means that we can extend $\mathcal{M}$ to a collection of $L''$-structures in exactly one way.
Given an $M$ in $\mathcal{M}$ we construct $M''$ by adding an $f$ to $M$ and assigning, as the intepretation of $f$, the function that sends $a_1, \cdots, a_n$ to $c$ where $c$ is the sole element of the domain of $M$ such that $M \models \varphi(a_1\cdots a_n, c)$ holds.
In this new setting where you have introduced $f$, the following does indeed hold:
$$ \mathcal{M}'' \models \forall x_1 \cdots x_n \mathop. \varphi(x_1\cdots x_n, f(x_1, \cdots x_n)) $$
This captures the existence part of your hypothesis. You also have at most one solution (anything satisfying the formula is equal to the solution proposed by $f(x_1\cdots x_n)$).
$$ \mathcal{M}'' \models \forall x_1 \cdots x_n \mathop. \forall z\mathop. \varphi(x_1\cdots x_n, z) \to z = f(x_1\cdots x_n) $$
So, to answer your original questions
- Sort of. All functions are total. You don't need a separate axiom to conclude that $f(t_1 \cdots t_n)$ exists where each $t_i$ is a term. However, you do need to prove that the new interpretations of $f$ are total, but that happens early in the process. You have to check the totality of $f$ when you build the structure, not later. There are systems of logic that do not require all functions to be total, called free logic, but those systems are not first-order logic.
- The domain of the function is always the entire domain. The function symbols always live in the language. They cannot be bound inside of a formula in first-order logic. If you allow functions to exist "locally" or be introduced in various ways, then you are most likely dealing with some kind of second-order logic.