As I see it...
Mundiga (the WM world) is generally prone to portals and dimensional instability. For some reason, the effect is more pronounced in the area where Crossgate now stands. That's something of a mixed blessing. The area is dangerous, getting more than its fair share of extradimensional nasties, but there's also some unique items come through the warp. There's profit to be made there. Which is how Crossgate came to be founded.
The trouble is that those portals make Crossgate a dangerous, unpleasant place to live. Added to that, the place is right out in the sticks. Over time this has meant that the post of Governor of Crossgate has come to be seen as a punishment posting, which has seen a succession of governors who hated the place and wanted as little to do with it as possible.
This in turn allowed widespread corruption and the emergence of the gangs as the de facto rules of the city. Of course, this made the city even less appealing to outsiders, creating something of a vicious circle.
Crossgate itself, I see as something like a provincial city from the Roman Empire with a light dusting of Stalker anomalies that occasionally swallow citizens or spit out newcomers. You can find these anywhere in the city, but for some reason they tend to be drawn to the marketplace and the sewers. No one is sure why this is so - the market has been moved, and the anomalies tend to follow it, suggesting that some magical doctrine of similarities is at work, somewhere. Crossgate's traders are known throughout the land as being hard to impress. They really have seen it all.
There's still a fair number of of extradimensional artifacts that end up in the market too, often without much understanding of their function. Just one more reason why Crossgate Market can be unexpectedly exciting.
The other thing Crossgate is known for is the slave trade, which also grew out of the unstable nature of the city. The anomalies brought not only artifacts, but also unique beings, any of them with useful
talents or knowledge, and not all of them interested in co-operating. Over time Crossgate became a hub for slaver caravans.
As for the catacombs, I believe they are a special case. I think the catacombs are the result of a long dead mage trying to create his own extradimensional space. He probably hoped that the precarious nature of Crossgate spacetime would make it easier to establish such a space, possibly because he otherwise lacked the skill or power for such a project . Certainly he made a right pigs ear of the project; the catacombs floorplan is different each time the door is opened, and portals can open and close with little warning.
It's possible that the PC's dungeon is a stabilised manifestation of the same enchantment, which would explain why it seems to have infinite capacity, and how the same dungeon can apparently be attached to multiple brothels. It also could explain why the dungeon escaped notice when the PC's father was killed. Deactivate the spell that binds the dungeon to a building and there's nothing to find, unless you know the cantrip to reattach it, of course.
Anyway, that's more or less how I see Crossgate.
