First, if a word is properly constructed using material found in one of the canon sources is it considered canon?
That's up to each and every Klingonist, but I think the answer you'll most commonly get is "No"; canon is strictly that which is found in canon, which is usually defined as anything produced or approved by Marc Okrand.
Second, if wI' can imply "thing which does" and possession how does one know which is which is which? I may have already figured this out as I just noted "thing which does" wI' is attached to verbs to make nouns while the other wI' is attached to nouns to show possession. Is this correct?
That's precisely right. That being said, there are a lot of homographs in
tlhIngan Hol, and - as is the case in natural languages - context is usually necessary to root out ambiguities.
Finally, in A Burning House I find the word jeghpu'wI' defined as conquered peoples. Is this correct? It seems that literally it would mean "my many people capable of speech surrender," but its also attaching two nooun suffixes to a verb which seems incorrect (though I haven't reached the verb section of the dictionary yet so maybe that clears it up) To get the definition given in the book wouldn't jeghwI'pu' be more correct? It would be literally "many people capable of speech who surrender," and it would use wI' to turn the verb jegh into a noun and then pluralize it with pu'.
jegh is a verb meaning "he/she/it/they surrender(s)". When attached to nouns, -
pu' is a pluralizer, but as a verb suffix it marks the past tense. -
wI' then makes it "one who does", so
jeghpu'wI' would be "one who has surrendered".
I find it a bit odd that they use
jeghpu', rather than
jeghta', as -
ta' is used for actions that were carried out purposefully, and I don't know how one goes about surrendering unpurposefully. That being said, perhaps "surrender" is only a
close translation of
jegh, rather than a perfect one, so perhaps it is possible to
jegh "by accident"

Also, -
ghach is usually used instead of -
wI' when the phrase before it (in this case
jeghpu') has suffixes. However, there are some exceptions to this rule (for instance,
ghojmoH, "to cause to learn", or "to teach", apparently became a common enough phrase to become a new root word in its own right, wherefore
ghojmoHwI' is often used instead of
ghojmoHghach), and I suppose there may be some cultural/historical/jladsjalhfkah reason for this exception, as well.