Can you create new users without entering email, then prompt user upon first login? I want the site administrator to be able to create a user, submitting only a username and a dummy password.

This information would then be 'manually' sent by the administrator to the user, whom upon their first login, is forced to enter a verification email and change their password.

How can this be done through modules or otherwise?
Use Force Password Change module.

This module allows administrators to force users, by role, individual user, or newly created user, to change their password on their next page load or login, and/or expire their passwords after a period of time.