No, they won't get unhappy - but it does feel a bit mean sometimes to pull them away from a celebration when they've been working hard.

Watering the crops doesn't make any difference to how fast they will grow, so you can put the farmers on to something else until they're ready for harvest (click on the crops to see how long to the next harvest).

As for why they do laundry - "because they can". Same reason they relax, exercise, chat, argue, complain .... All work and no play makes a dull village.