Can I when i have Sam Gamdschee in play? In other words, does Bill's ability still work when he's in the discard pile?

No, because you're not playing Bill, you're playing Stand and Fight, which has no special interaction with Sam Gamgee.

He'd still cost 2 I think. Bill's ability says you can "lower the cost to play " him, but with Stand and Fight you are not "playing" the ally, but rather putting it into play.

Yeah, just realized myself it doesn't work because of Stand and Fights card text ("X is the printed cost").

Still, it's a cool card when you're playing Deadmen's Dike.