I'm so lost on how to play spots like this.

Background: An underground 2/5 NL game with mostly terrible loose-passive players. There are a couple other aggressive players at the table but none are involved in this hand. V1 does not know how to size his bets properly. He's very new to the game and is just there for the entertainment. I've seen him bet 1/10 of the pot with the nuts, and I've seen him do it with underpairs to the board. V2 is a total drooler. Top pair is good enough to play for his whole stack, which is rarely much bigger than his buy-in of $200. I saw him call a raise out of the small blind with K-6o, x/c Kxx flop, x/c turn, x/c all-in OTR. V3 isn't very good either, but has a basic grasp on relative hand strength.

Hero covers all. V1 has about $200, V2 about $300, and V3 has $42.

Hero picks up A Q UTG +1.

I decided to raise this one a little bigger than normal because the last couple of time I raised in EP the whole table called. I opened for $40.

V1, and V2 call and so do 2 others. V3 in the BB goes all-in for $42.

Flop: 2 3 4 ($200)

Hero checks. V1 bets $40. V2 calls and Hero calls. V2 doesn't look very strong at all or very happy about calling but doesn't want to turn down 7:1 pot odds.

Turn: K ($200 main, $120 side)

Hero checks again. V1 bets $40 again. V2 calls again but seems a little happier about it. I think he probably had a naked diamond that just floated the tiny flop bet and he now picked up the draw - and yes, he's that easy to read. I don't know what V1 has but I'm fairly sure that a non-diamond A or Q wins the whole pot, and a 5 is good for a chop.

River: 9

Hero checks again. V1 checks this time. V2 goes all in for his last $100 and Hero and V1 both muck.

Thoughts? I didn't like playing the hand this way, but didn't feel I had enough fold equity to blow two stationy and inept villains off their hand.

Bet smaller preflop. You can easily stack these opponents who will call down with top pair weak kicker. You want them to call preflop with worse Ax and Qx. I'd raise about $20 pre.

Give up on the flop. You completely missed. Three clean outs to a potential chop is not worth calling 7:1 odds in a five way pot. Especially give up on the turn. You could be drawing dead and you still don't have the odds to call and hit a non-diamond 5. The river is also a trivial fold.

Beat inept loose passive players by value betting solid holdings like TPGK+. Calling down with A high in multiway pots will cost you lots of $$.

Hand is fine. No way you should bluff two fish in a protected pot.

Big raises are good to isolate, but if they aren't working, then you are forced to play down to the lowest common denominator..

In this case, it means fit or fold when you go 4 way to the flop in a bloated pot.

Sometimes boring poker is the most profitable poker.

If we're still getting lots of calls in this game by worse with an EP raise to 40 I think we can continue to do so.

I played a hand with one of the other players at the table a few months ago where he limped in LP, the button raised to $20 and I bet 3! to $80 with AK from the BB. He and I got all-in on an A-high flop and he disgustingly flashed A-3o and mucked when I showed.

So there is plenty of value in raising big with premiums. Literally the only time anyone 3-bets (and is not all-in or significantly pot-committed) in this game is if they have QQ+, sometimes JJ-TT and sometimes AK depending on the player. So it's perfectly safe to raise smaller with suited connectors and baby pairs and raise huge with premiums because they literally do not adjust at all.

I'll agree that not everyone is lucky enough to play with villains this bad, but this is what you get in a state where the nearest legal casino is 4+ hours away and people want to gamble.

And no, you can't have an invite.

Wow. Alright. Then I would bet big with AJ+ and TT+ preflop. Why can't I play in these games?

I would raise small or not at all with SC and small pairs. See a flop as cheaply as possible and extract the max when you hit.

The game you are describing sounds a lot like the 2/5 nl games I play in everyday, so I have made many adjustments to play the most profitable way possible against these droolers. With hands like AQo, I have been limping these hands in early position and absolutely crushing these guys playing post flop against them. In these types of games these guys just want to see a flop, and like you said, will stack off with top pair and draws.
Also its easier to isolate and play AQ against a short stacker if someone does come in for a raise after you limp.
If you are comfortable playing post flop in these types of games you describe, you will clean up. Good luck!