Each source is in which layer of the mesh?

I thought that when we use a five-layer mesh for generating the head model, some sources will be in gray/white matter and some of them will be in CSF. Am I wrong?

You are talking about a FEM mesh to be used with Duneuro, right?
No, I think the sources should not be located outside of the gray matter.

when we use depth weighting with minimum norm imaging as a method and current density map as a measure, are we calculating weighted minimum norm estimate(wMNE)?

Yes.

what is the bst_wmne function?

The function bst_wmne.m disappeared years ago.