The aphids eat on the leaves juices I believe. They compromise new growth and leave the plant fighting aphids instead of growing new strong leaves. Supposed to reduce pepper yield too.
Here is a link to some info on them.
http://www.hort.uconn.edu/ipm/veg/htms/aphids.htm
Those little red things could be spider mites which is a more serious issue than the aphids. Do a google image search for red spider mite and see if it looks like your critters. If so, find a way to kill them!
As far as your stem, I have no idea. It looks like it got woody (they all do eventually). But it's also thinner looking than the rest. I would take some of that rooting compound of yours and coat it, then bury it deeper, so the woody part is in the ground. Use rooter above it too. Maybe bury it up to two inches above where the wood ends? Your roots look rough. Not like a ball. As if something is eating them. I had fungus gnats that made my plants look like that...
Here is another good link to types of pests.
http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/opp4527