Hesitant to cover butt/crack hair and wondering if there is risk of cancer or anything if I choose to get this area covered?

Since the follicles are transplanted in this process, it is the perfect choice to re-establish hair growth in the beard area after LHR. You might try PRP and ACell to see if you can stimulate dormant hair follicles to produce hair.

From the pictures you provided it appears you are having an allergic reaction to some sort of topical cream or gel used for your treatment.  I would reach out to the provider immediately and have them guide you on a cortisone cream of some sort.

The less hair growth you have above the surface of the skin, the less likely you are to experience burns on top of the skin.  This is particularly important for those with darker skin, which can undergo pigment changes after burns or inflammation that have a lengthy resolution time.