I read this rule: "Use only your chosen colors. You may not layer translucent colors or use blending (even for lighting etc.). Only the 8 colors can be displayed while the game runs. You are allowed to use fully transparent pixels", but I am not 100% sure I know what "layer translucent colors" or "blending" is.

The main thing is, if I pick a color like red, and I change the V value from 100 to 75 to be a darker version of red, is that a different color? Or is that acceptable?

And what about outlining things with single pixel black lines, do I have to make black one of my 8 colors?

You may not layer translucent colors or use blending (even for lighting etc.).
Only the 8 colors can be displayed while the game runs.

This means that you must be careful with lighting because of shades. Those shades should still be displayed as one of the palette colors. If we'd be to screenshot the game at any given time, each pixel should be exactly one of the 8 colors of the palette.

Setting V value would give another color. Outline color must still be a color from the palette.

You can using dithering to create the illusion of "new" colors also check out this video might be helpful.
Doom on CGA (4-color and composite/colorburst mode) and EGA

Dithering for beginners Learn Dithering.