La prisión está cerca de la estación.

Because Spanish normally uses estar for the location of people and things. A prison is a physical place, so La prisión está... is the natural choice.

A very useful rule is:

• estar = where something or someone is
• ser = what something or someone is

So:

• La prisión está cerca de la estación = the prison is near the station
• La prisión es grande = the prison is big

One important exception: with the location of an event, Spanish usually uses ser, not estar. For example, La reunión es en la estación.

Because cerca normally takes de before a noun or pronoun.

So:

• cerca de la estación = near the station
• cerca de mí = near me

If there is no noun after it, cerca can stand alone:

• La prisión está cerca = the prison is nearby

So in your sentence, de is required because la estación comes after cerca.

Because both prisión and estación are feminine singular nouns:

• la prisión
• la estación

Spanish uses articles more often than English does, and in this sentence both nouns are definite: the prison and the station.

Also, nouns ending in -ión are very often feminine, so:

• la prisión
• la estación
• la nación
• la canción

Because Spanish only makes a contraction with el, not with la.

The only standard contractions are:

• a + el = al
• de + el = del

So:

• de la estación stays de la estación
• but del museo comes from de el museo

Since estación is feminine and uses la, there is no contraction.

The written accents show where the stress goes.

• prisión → stress on the last syllable: pri-SIÓN
• estación → stress on the last syllable: esta-CIÓN
• está → stress on the second syllable: es-TÁ

Without the accents, a Spanish reader would expect different stress patterns.

In está, the accent also helps distinguish it from esta, which can mean this.

In standard peninsular Spanish, the c before i is usually pronounced like the th in think.

So estación sounds roughly like:

• es-ta-THYON

A rough full-sentence pronunciation for Spain would be:

• lah pree-SYON es-TA CER-ka deh lah es-ta-THYON

A few notes:

• j is not present here, so there is no harsh throat sound in this sentence.
• The r in cerca is a light tapped r.
• In much of Spain, c before e/i and z are pronounced with that th sound.

Not always by itself. Estación can mean different kinds of station depending on context, such as:

• estación de tren = train station
• estación de autobuses = bus station
• estación de metro = metro station

It can also mean season in other contexts, as in la estación del verano, though that is clearly not the meaning here.

If the sentence just says la estación, people often understand it from context.

Yes. Prisión and cárcel are close in meaning, and both can often be translated as prison or jail depending on context.

Very generally:

• prisión can sound a bit more formal or institutional
• cárcel is very common in everyday language

So La cárcel está cerca de la estación would also be a normal sentence.

This order is the most neutral and natural:

• La prisión está cerca de la estación.

But Spanish word order is somewhat flexible, especially for emphasis. For example:

• Cerca de la estación está la prisión.

That version is more marked and sounds more literary or emphatic. For everyday use, the original order is best.

Normally, no. That sounds unnatural in standard Spanish.

Spanish usually needs the articles here:

• la prisión
• la estación

If you changed the article, you would change the meaning:

• La prisión está cerca de la estación = the prison is near the station
• Una prisión está cerca de una estación = a prison is near a station

So the articles matter both grammatically and semantically.

Not in this sentence. Here cerca functions as an adverbial expression of place in cerca de.

That is why it does not change form:

• not cerca/cerco/cercos
• just cerca

Compare:

• La prisión está cerca de la estación = the prison is near the station
• La estación está lejos = the station is far away

In this type of structure, cerca and lejos behave like location adverbs.