Some answers to my scenario:
The Party is well-known enough for those who travel occasionally to have heard of them. They were overheard in a nearby town indicating that our village was on their path to their final location, but they were to spend a day or two in the place it was overheard first. The party has no outstanding reputation for being rapacious or particularly malevolent, and while not much has been heard, what has been heard has been positive. The region in which I live is fairly quiet the majority of the time, with little issues with anything outside of the occasional highwayman or monstrous humanoid wandering around. (Orcs in the hills, but direct conflict is so rare as to be unheard of).

My reaction would apprehension and a bit of excitement. The world just doesn't offer much a commoner like myself, especially nothing truly miraculous or adventure filled. I take care not to spend my meager wealth on anything too extraneous so that I might be able to go into the Inn and buy a few drinks should they stay over and not just pass through. In the Inn, I'll stay back but close enough to hear them talk should they tell tales of their adventures, and dream of a life outside of toiling in the fields and another season of farming.

When they depart, I'll tell tales of having 'met' them, likely embellished a little, to my children and grandchildren and to the occasional traveller, if I think it will score me a free drink or two one night at the Inn.