Its probably just rusty but before we break something I thought I would check.
As @Nate Wengert says that screw is for adjusting chain tension. It pokes into the axle slot and prevents the axle from moving forward. It does not attach the axle or hub to the frame in any way.
It sounds like you just need a bit more torque to get the axle nuts undone. If you cannot apply enough torque with a full size wrench, a short length of approximately 1" diameter sturdy metal pipe that can be slipped over a wrench handle to extend it for more leverage - sometimes known as a 'breaker bar' - is the usual tool of choice.
Apply WD-40 or similar to help loosen the nuts before attempting to undo them.
It's best to use a box-end wrench if you can. Avoid an adjustable wrench if possible because there is a greater chance of rounding the flats on the nuts.
Also, you want to be really, really sure you are loosening not tightening (we've all done this at some time), especially if you use a breaker bar as you may end up rounding the flats on the nuts or stripping the threads.
The nut in the orange circle is what you need to remove on either side of the hub, there should be no use for a hammer in this application. Simply use an adjustable wrench on either side and remove counter clockwise.
The yellowish green arrow points to a tensioner screw, which helps to tension the chain and properly space the axle in the dropout so that it is equal distance on either side.
The blue oval is an issue, your chain should not be doing this and i'm not sure how that happened. Is the chain off the front chainring so that it is loose i assume? I would roll the wheel forward and fix this chain hang up before removing the wheel so that your not fighting it when you try and slide the axle back and out of the dropouts,