AC and heater are separate systems in a YJ. You could run them simultaneously if desired (not that you would want to although maybe you would when defrosting).
Vent mode on the heater does NOT blow any air. It literally opens fresh air vents (one above the steering column and one in front of the passenger's knees down under the dash (big square vent - you can physically see it open). This creates a draft while driving down the road.
The two knobs below the steering column are AC. One controls freon/air temp and the other controls blower speed. If you have room temp air coming out the side vents but cool air in the middle, I'm not sure why that would be.
Freon is R12 until somewhere around 1994. You won't be able to buy it yourself but a shop can charge it for you, just call around until you can find a shop that has R12. You can also retrofit to R134a but I really don't know anything about that.