Can coal become to dry to burn?

Not sure if it's and old myth or has any truth to it but you will hear that from a lot of old timers. Having said that I'd venture to guess any benefit of having it damp is probably be negligible if it were true but i really don't know. I have a old placard here from Van-Wert which states you should keep it damp but it doesn't say why. Keeping it damp is not an issue other than possible surface rust that may occur in some stoves on parts like that hopper...

3.Avoid using dripping wet fuel. Damp fuel is desirable.....

This is pretty old and may be the entire manual...

No idea, I'm assuming its something like a coal mouse but with very small pieces of wood? This placard is not from my furnace, i found it in a friends basment and he gave it to me. The reason for not starting it with wood is it's possible for a unburned piece to get stuck in the mechanism which will cause it to break. We use wood anyway as its the easiest to use. Just have to make sure the pieces are not that thick and we always use split 2x4's which are very dry and easily burn up.