The word "general" there throws me for a loop. Does it mean that the Lost Soul returns to your opponents Land of Bondage?
Yes it does. Lost Souls and occupied sites are in the Land of Bondage, and the wording of this card being old, it refers to the "general" LoB for this purpose. Essentially, site comes over, but any souls there stay in that LoB.
When they all join the battle, do they all band together?
Siege is a band ability, which brings all of the characters into battle, yes.
Should the word "site" on this card be substituted for "fortress"?
b) I don't get the point of having heroes put in this fortress when they are about to be discarded. They are being treated like they are discarded anyway. Is there something I'm missing here? Maybe something about fortresses I don't understand?
Yes, it is actually a errata'd to say so. This card was originally printed in Warriors as a site, because fortress was not a type of card that existed then). It has since been reprinted appropriately as a fortress, but the wording stayed unfortunately. They both are fortresses and the special ability refers to the 'fortress'.
I don't get the point of having heroes put in this fortress when they are about to be discarded. They are being treated like they are discarded anyway. Is there something I'm missing here? Maybe something about fortresses I don't understand?
There were cards printed in those sets and after that refer to the fortress, and can do things like release all heroes there to your territory. At that point, there were limited options for getting discarded characters back, and this was a pretty good one in combination with those other abilities. For example:
Conqueror over Death: Return all Heroes in your Potter's Field to the field of play. This ability cannot be negated.
Written while Koala posted...agreement all-around 
