Marshfield is a nice city to live in. I was born there and grew up about 30 minutes to the north.
Things to know about Marshfield:
1. The economy is entirely driven by the Hospital. St. Joe's is the biggest hospital in the area, probably the state. I would venture to say that the nearest hospital close in size to it is Mayo over in Minnesota.
2. There's LOTS of money rolling around in Marshfield. There's more Doctor's and Doctor's wives and kids than you'll be able to count, and the both the school system and the city shows the amount of money in the city.
3. Housing prices are average in the area, unless you are building a new home - which can be expensive.
As for your questions:
The papermill smell doesn't reach Marshfield. In fact the Papermill smell doesn't make it more than 1-2 miles outside of itself if that and it's mostly near Mosinee.
As for Distance to points around the state:
Twin Cities - 2 hrs 40 min
Wausau - 30-40 min
Madison - 3 hrs 10 min
Green Bay - 2 hrs 30 min
As for your question about where the businesses are going -- they're actually all being built outside the city limit.

The city won't cut the businesses a good deal on taxes so many of the new businesses build just outside the City limits. Though one of these days the City will just annex the area.
As for the people - yes they are extremely nice.

It's Wisconsin!! Everyone is nice outside of Milwaukee and Madison!
As for the weather - it can be rough. I don't know what Rhode Island is like, but I'm guessing you've never really been through a midwest winter - which can be brutal. Temperatures in the Winter average around zero, though sometimes it gets down into 10 or 20 below zero. As for snow - we usually get 40-50 inches. Ice storms can also be a frequent occurance. My only advice is if you haven't really learned how to drive in the winter - the first time it snows drive to an empty parking lot and practice braking. Driving in the Winter is really a learned skill, and everyone in town already knows how. So practice a little
Summers on the other hand are GORGEOUS. Average temp is 78 during the summer. There's always stuff to do, and many people just sit out on their decks, have a drink and yap with friends.
Bring winter clothes!! Oh, and by the way the Packers are a way of life out here

So be prepared for it.
Other things to note:
Try to buy a house with a two car Garage - you'll thank me later.
Marshfield's population is rather stagnant - Highway 13 and the Railroad are what really put Marshfield on the Map. Highway 13 is rapidly losing it's influence especially since Interstate 39 was funded (Runs North-South through Wausau). The Railroad is all but dead. The Hospital and shopping is keeping the area alive. I know quite a few couples who bought homes in or around Abbotsford - because 1 spouse works in Marshfield and the other works in Wausau or Eau Claire. The nearest Freeways running through the State are Hwy 29 (intersects at Abbotsford, take hwy 13 north out of marshfield) and Interstate 39 (Formerly Hwy 51).
All-in-All Marshfield is a nice place to live, and a nice place to raise kids. It can just be a bit off the beaten path for driving. Really has a nice smalltown feel to it.