Not a linguist, but I can’t see any case where pour or avec, or even à would be used with a direct pronoun. Thus, I guess you direct object pronouns should be used whenever the complement is already direct whereas indirect object pronouns should only be used when the complement is indirect, such as with a preposition (à, pour, avec, etc).

Not sure if this answers your question though.

As Aerovistae said:

In many languages, especially romance languages, there’s a difference between indirect object pronouns and objects of prepositions. At least in French and Spanish, they’re two separate categories of pronoun. It’s simply a different grammatical context. If the pronoun is the object of a preposition, like “with me” or “from him” or “over them”, then you use that category of pronoun.

If I understand your two questions right:

1. There are essentially three pronouns that result from combining prepositions.

First, de + any phrase can be replaced by en.

Il achète des pommes. Il en achète.

Next, a preposition introducing a place can be replaced by y. This includes à, dans, sous …

Il va à Londres. Il y va.

Finally, à and pour, which point to the beneficiary or recipient of an action, can be replaced by the indirect object pronoun.

Il parle à moi. Il me parle.

Il achète des pommes pour moi. Il m’achète des pommes.

Other prepositions don’t combine or disappear into pronouns.

2. The difference between a regular and a pronominalized complement is one of emphasis.

That is, this is the normal way to say it:

Il me lit une histoire.

But this is the emphatic way, and in fact, the meaning of à moi is so specialized that French speakers prefer to include me anyway to cover the regular sense of who’s hearing the story:

Il (me) lit une histoire à moi — et à personne d’autre.

Note, of course, that this only applies if the object is already known. For common nouns, they would have to be introduced before they can be pronominalized. What I mean is that this is not emphatic:

Il lit une histoire aux enfants.

But once they have been mentioned the first time, they become leur or else it is emphatic.