1) I don't have a GitHub (or Bitbucket, or other "profile" on similar repository hosts), or anything else in your list--at least not that I advertise or share with people. Yet I'm in SV earning in the mid $100k. The kinds of companies who put a lot of weight on the things you list are disproportionately likely to be social media sweatshops with a dogmatic view of development (if it's not <latest fad JS framework>+RoR+Cloud developed on a Macbook Pro, it's not "development"). If you want to work for them, you need those things; otherwise you don't.

I have a full-time job, as I noted, and a toddler at home. Over the last six months I've found a half-hour here, an hour there to do side-projects. One of which (and my only, to-date) I just released to the Google Play store. There is absolutely no reason you can't do this.

What does "I'm not allowed" mean? I can't think of any employment contract that would restrict you from doing any other development work on your own time. Just pick projects that a "reasonable observer" would not think overlap with your "day job" work.

2) You should not cash out your 401k to live on. It is not that kind of savings account (i.e. an "emergency" fund). However, if you have a solid investment opportunity in something (relatively) stable for the long-term, such as real estate, it may be worth it. I've cashed out my 401k three times, two for the wrong reasons (to fund relocations), and one to purchase a home that I now rent out and derive significantly more income (net of taxes and other payments) from than had that money been in my 401k fund.