Okay, so before I start, let me say this. Yes, I searched. Nothing.

I have two questions. The first is more important to me. How do I find where a bullet hit something when it collides in Lua?

And lastly, how do I create an explosion (preferably customizable in size and such) wherever I want with Lua?

You can see where I am going with this...

Stick that to your Update(self) function
It will trigger if the bullet lodges into a wound, runs out of lifetime or settles into terrain, that is, is set to delete.
The bullets position will be at self.Pos

You could also use Destroy(self), but I have experiences suggesting that it's very crashy.

For the explosion,
make a MOSRotating with oldschool ini and then spawn and gib it with Lua.
You can spawn mulitple ones for more intense explosion.