1. In this chapter Fitzgerald writes about the Valley of Ashes. He also mentions dust and smoke (at the party). All three of these reappear...

The Valley of Ashes is a major symbol in The Great Gatsby.  Although most of the action in the novel takes place elsewhere, some very pivotal things happen at George Wilson's garage, located on the edge of the valley of ashes.  This is the home of Myrtle Wilson, Tom's mistress.  It is here that Myrtle is hit by Gatsby's car, wildly driven by Daisy, it is here that she dies, and it is here that George Wilson cracks up and emerges to find and kill whoever killed Myrtle.

George and Myrtle live in the valley of ashes, trapped in relative poverty.  The wealthier characters, who live in East and West Egg, may not live in the valley, but they have to pass through it every time they go to the city.  So one thing it symbolizes is the difference between the lives of the privileged classes and the working classes.  Myrtle seeks to escape the valley of ashes through her affair with Tom, who takes her to an apartment in the city.

In the link below is an article that argues that The Great Gatsby is loosely based on Dante's Inferno, which is a tour downward through the successive circles of hell.  Nick's description of the valley of ashes is meant to sound hellish ... but interestingly, according to the article, hell includes New York City itself: "The Plaza Hotel on 59th Street and Fifth Avenue is apparently the ninth circle of hell." 

Though the wealthy characters have no desire to dwell in the valley of ashes, its influence keeps reaching out to get them.  Tom, for some reason, chooses to take a mistress from there, thus setting in motion a tragic chain of events that ends in the deaths of Myrtle, Gatsby, and George Wilson.  The valley of ashes is surprisingly difficult to escape from, as Nick describes:

The valley of ashes is bounded on one side by a small foul river, and when the drawbridge is up to let barges through, the passengers on waiting trains can stare at the dismal scene for as long as half an hour.  There is always a halt there of at least a minute ...

Now, what in the world is a dim, dirty, hellish place to live ... in which some are sentenced to spend their whole lives ... which others try to avoid but must pass through from time to time ... which fascinates some people even as it repels them ... which tends to trap those who pass through it ... which tends to cling to, or follow, those who have passed through it, bringing destruction with it?

Call it Poverty, or Murphy's Law, or Human Frailty, Sin, or even just The Real World.  The valley of ashes could be all these things.  Dust and smoke encroaching on Gatsby's party show that even there, he cannot escape these things.