Yes, fluoride is toxic. The EPA limit for fluoride is 4ppm, and that is probably too high (something like 2ppm would work better). There are parts of the country where the natural incidence of fluoride in groundwater is in excess of 4ppm, and therefore defluoridation needs to be done.

Fluoridation of drinking water is done to a standard of 0.5-0.75 ppm (US Public Health Service specifically recommends 0.7). Most of the country lives in places where the natural ground water concentration of fluoride is below this level, and thus fluoridation is necessary to reach the recommended level.

No, not toxic; you are correct.

A tiny amount of fluoride is helpful for bones and especially teeth. Fluoridated toothpaste covers this need perfectly, but many people don’t use it. Fluoride in drinking water covers this need also but (arguably) brings along small risks of symptoms of slight excess fluoride consumption.

The amounts that are actually put in drinking water do not seem to have any significant negative effects, and it seems reasonably clear that the population positive effects dominate, but being non-consensually subjected to a marginal risk of negative effect in order to achieve a positive outcome for the population is exactly the kind of thing that reliably provokes this kind of reaction from the paranoid libertarian set.