Think of the analogy. The image is of a bull with a ring through its nose, and a rope tied to the ring. So the farmer decides where the bull should go, by leading it by the nose. I suppose resistance would be quite irritating, if not painful. It's a slightly disturbing image when applied to your sentence.

Normally 'to lead someone by the nose' is used to mean to control someone and make them do whatever you want / easily persuade a gullible person/ make someone follow your point of view or accept your argument. It can be very similar in meaning to 'lead someone on'. He is so in love with her that he lets her lead him around by the nose.' So it's okay in your first example but sounds strange in the second one.

Yes, you can use this phrase in this context, although it's a little awkward. I'm sorry, but I can't really think of a better way to phrase it at the moment. Perhaps I'll think of something later.