"It" creates an object for the liking. If you just say "Do you like here" its unclear and makes the listener think you are referring to how they like "here", wherever that may be. The it clarifies.

Yes, only one of them is correct.

"Here" is an adv. so it can't be an object. You can't say "Do you like here?"

"Do you like here" is incorrect!

Yes. The former is incorrect. You've got to have the 'it'