Among other things, set 8404 contains a train but it doesn't come with any track pieces (see set 7499). Is this train compatible with these Lego City tracks? I see where it's more of an electric trolly and if it's not track compatible, is it at least wheeled?
It is designed to handle curves that are found on CITY track. Here is the detail from middle car. There is tongue and groove that allows the middle wheels to slide left and right to enable curves. I will post a video of a powered train pushing it, if needed.
To a degree, Yes. The tram works well on straight pieces of track. It doesn't look like the tram was designed to be used with CITY track.
The wheel axles are fixed to one point so they cannot navigate curved pieces of track easily. A simple modification should be able to fix this.
The wheel used are smaller than regular train wheels and are usually never used in train sets; but more for smaller train-like stuff (Spider-Man metro, Indiana Jones mine cart, track buggy, track maintenance vehicles...)
So they will work on regular track, but their smaller size mean they're more likely to derail, and they have more friction around the axle than normal train wheels. Straight track is definitely OK, curves will presumably be good too, but be careful around switches.