When creating Flash templates, do the movie clips containing text fields that will be populated, need to be either on the stage or in the library for the Flash/Animate Template Generator to see them?

As an AS developer I no longer use the timeline/stage and create all my objects through ActionScript so I would create a textfield something like this:

var textField:TextField = new TextField();
textField.name = "textfield_1";
addChild(extField);

Would the Caspar SetData() function be able to see this text field and then populate it?

No, the TemplateGenerator plugin only sees TextFields placed on stage. But by overwriting SetData() you can update generated TextFields from code.

So do I still need to call super.SetData() to populate those text fields or should I be reading the xml and setting the values of the fields in my overridden SetData() function?

You only call super.SetData(xmlData); when you have fields, that are present on the stage (and where the instance name does not start with an x) and are not handled by code.

That's all clear now, thank you!