Real or created or a blend?

I have a few questions, and I realize they might be silly, but I have a touch of OCD and want to do things "right", if "right" exists.

Do you use real place names in your stories, or would it be better to create new places/names? For example, if I place my story in an existing mid- or small-sized town where readers who live there are very familiar with their town, would it be better to use existing street names, or make up new names? I would imagine it rarely happens that someone reads a book while referring to a map at the same time, but it's possible, especially if they're from that town. They might object if they notice that I've squeezed in a fictional street between two streets that actually exist, or if I've added a building or a landmark on an existing street where there is none. Should I just avoid all that and create a whole new town that just happens to resemble the actual town, and if so, could I include famous landmarks that actually do exist?

My other question is about my fantasy WIP. It doesn't take place in a quasi-medieval setting, but it does take place on "earth" or a planet very like it that is sparsely populated and mostly wilderness. The specific planet is not addressed in my story. My characters are animalistic humanoids who refer to each other as "people", and they do live in small towns. How much normal terminology should I use for plants and animals, or is it okay if I blend them with created terminology? For example, my characters eat foods like spinach and fish, but I've created one fruit that doesn't actually exist. They also use herbs for cooking, medicinal and magical reasons, and some of them are herbs that exist, but a couple are herbs I've created that have specific attributes important to the story. I have a tree with special wood, but there are also oaks and pine trees. I'm also creating some specific weapons that fit with the races of my characters, but some of the minor characters might also use common weapons like bows and arrows.

I guess I'm asking, in my very long-winded way, is if it's okay to blend existing items/places with created items/places, etc.?

Thank you for responding so quickly

Sue Grafton writes about Santa Teresa, which I believe is Santa Barbara, CA, and I have read two books in which I recognized the town simply by the description, although they were given different names in the novels and found out later that I was right.

What about using a famous privately-owned establishment like the Tattered Cover bookstore in Denver? Could I use that in my novel, or should I rename it? Would there be legal issues? I would think, at the very least, a mention should appear in the acknowledgements.

Thanks for responding, everyone

I guess for the locations, as long as I don't get TOO specific, it should be okay. On the other hand, I'll want to do a little more description on the created items without ending up in an infodump.