The "wild west" is an invention of hollywood through and through.

Let's start with those saloons. A typical "wild west" saloon is a large open space filled with tables with a bar at one end and wing doors at the entrance. In reality a typical bar in the old west would have been long and narrow with few windows. And it would have had a regular door because there is basically nowhere in the old west where you don't want to keep the outside (rain, wind, dust, cold, heat, etc.) separated from the inside. However, a narrow bar with a regular door isn't such a great setting to work with cinematographically.

As for "cowboys", that's another hollywood invention. The typical "cowboy" was not a gunslinger. The vast majority of cowboys were also very different from the stereotypical "white male protagonist" that fills hollywood depictions. Most were not white, instead they were mexican, native american, and black, predominantly. Indeed, cattle ranching techniques as practiced in the American West originated in Spain and were brought over and adopted by vaqueros ("buckaroos"). It was hard manual labor that was originally dominated by Mexicans, so it was a field of work that tended to be eschewed by white folks.

As for the sizes of towns there are many reasons for small towns. Many mining communities often started off very small, for example. When transcontinental railroads were built there was a need to maintain watering stations at regular intervals along the railways, and small towns sprouted up at these locations. Forts and outposts were also built by governments for protection and trading purposes. The long distances of travel across the west made it desirable to have small places to stop and resupply along the way.

Perhaps most importantly, the nature of agriculture at the time meant that towns would often be very small relative to the total population in the area due to the large percentage of folks who were farming. In an area most people would live out on their farms in their own houses. The city proper might only contain a general store, a post office, and a combination church/schoolhouse. And that's all the city infrastructure a community of perhaps even hundreds might need.

As for crime, banditry, and gun fights, those too are vastly exaggerated by hollywood. There are a few notable instances of exceptional crimes having been committed in the old west but in general things were not exceptionally different from the levels of crime in the more settled Eastern seaboard. And hollywood has taken those exceptional events and used them to paint a picture of a west that was more movie friendly than the reality (more violent, more white, more barren).

The west was still a pretty unfriendly place in reality however. But what it had was opportunity. It was perceived as a place anyone could go to and either make their fortune or just make a living. Regardless of where you started from, it was a place where the primary determining factor between success and failure was you and you alone, your determination, perseverance, and hard work. With those you could homestead a farm and own land (consider the power of owning your own land in the mid 19th century on a global scale, it's not insignificant). You could stake a claim in a gold mine and become wealthy. You could build a business providing goods or services to miners, settlers, etc. and make your fortune that way. Or you could go out and work for others and simply make a living doing manual labor. For a lot of people at the time simply having these options and routes towards financial security, wealth, land ownership, business ownership, etc. were a tremendous opportunity compared to what was available elsewhere (whether that's back East or in Europe, etc.) Poland, for example, had conditions of serfdom up through the mid to late 19th century.

The interactions between Native Americans and settlers coming into the old west is far too complicated to jam into this reply, or even several posts, so I'll avoid addressing it. The one thing I'll say about it though is that it's better to see Native Americans not as a monolithic community but as a group of individual separate entities, each with their own values and goals, each making different choices for different reasons throughout history. And each with a different, complicated, and evolving relationship with one another and with white settlers. One might use the complex geopolitical shifts and evolutions of 18th and 19th century Europe as an analogy to the complexity of Native American politics, trade, and warfare.