In order to get a rocket launcher in the first level, there is a police car close to the start of the level. Destroy the car by kicking or punching it and the trunk will pop open and the rocket launcher will pop out.
In order to defeat Vulkan, you shouldn't run up to him and hit him, or you'll get shocked. Instead at the beginning run backwards until you get to some barrels and begin throwing the barrels at him. Continue this until he's dead.
If you destroy a car enough the hood will pop open. You must be Smasher to pick up the engine from inside it and begin using it as a weapon.
In order to hold more ammo, at the character screen, press C-Down, C-Up, L, C-Right, C-Down, and R. If done right, you should now hold more ammo.