Was there an episode in which Paul loses his virginity?
Yes, on the episode "The Wonder Years: Carnal Knowledge (#5.19)," Kevin and his friends go to see a movie while Paul stays home and has an encounter with a friend of the family. He comes to the Arnold household later that night and explains to Kevin that he lost his virginity. After the episode, Paul never mentions the girl again which would imply that it was a one night stand.
What happens to all the characters in the last episode?
At the end of the last episode (1973), Kevin mentions the fate of all the main characters. Winnie goes to Paris to study art history while Kevin remains in the States. They keep in touch as pen pals but Kevin ultimately gets married to another woman and has a son. Kevin's father dies of a heart attack in 1975. Following Jack's death, Wayne, now more mature and responsible, takes over the family business. In a few months, Karen gives birth to a baby boy making Norma a grandmother. Paul Pfeiffer ends up graduating from Harvard with a law degree.
What city/state do the Arnolds live in?
The Arnold's live in Glenn Valley, California. This can be seen in Season 4 Episode 7 "The Ties that Bind" in which old pictures from when Jack and Norma were married is shown. In it, it shows when Jack bought the house and there is a big sign that reads "Glenn Valley Realtors" with a big SOLD sign on the bottom. Since the Arnolds never moved in their family history this is certainly where they lived. This is supported in Season 4 Episode 1 "Growing Up" when the Arnold's attend the Norcom Annual Picnic and the giant banner we are shown says "Norcom Annual Picnic" and on the bottom "Industry" as in City of Industry, California.
On the other hand, there is also evidence from the episode "Wayne On Wheels," that indicates they live in a suburb of L.A. called Culver City. This comes from a brief shot of a letter that Wayne gets from the local DMV. Although Wayne's thumb is covering part of the Name / Address window area, there is still enough information visible to see that it was mailed to him in Culver City, CA. This seems a more direct piece of data than other "hints" given, that appear more indirect than this one. It seems, then, that the best conclusion is that the Arnolds live in the L.A. suburb, Culver City.