Very good question! 1.I would rather you DIDN'T tell them. The past tense is sometimes used in English to refer to an 'unreal' situation. So, although the tense is the past, we are actually talking about the present. The best example is using “would you” instead of “will you”. “Would you be so kind as to close the window for me? “ This is not really past tense at all. In fact, it a request to close the window in the present (“Would you” is more polite than “will you” in this example.) So the sentence “I would rather you DIDN'T tell them.” - does not mean that the person”you” had told them already. Normally the speaker and listener would already know the facts, so the context is very clear for them. They would both know that the telling hadn’t yet happened. 2. I would rather live in a smaller city so that I DIDN'T have to spend so much time commuting to work everyday. The same explanation as 1. What about changing the sentence into "I would rather live in a smaller city so that I DON'T have to spend so much time commuting work everyday." There is confusion in this sentence because there is now a mixture of the “real” and “unreal”. I would rather … is hypothetical or unreal I don’t have to …. is real So the sentence structure is grammatically flawed. Hope I have helped you

would rather is basically the same as prefer I would rather=i prefer

In both examples you got the meaning correctly.