They don't know what their specific wishes are, but they do know they are giving their wishes to him and they know what wishes are in the abstract as some of them do get granted in front of the whole kingdom. The situation with Asha and her grandfather also suggests that they know the wish, whatever it was, is important as he spent his life hoping his got granted.
The plot hole, for me, is Asha's surprise and finding out most wishes won't be granted as that much should have been obvious to everyone involved, not them being better off knowing their wishes/dreams. I'm sure this will differ from viewer to viewer, but I think it would have been more effective if they could have more dramatically demonstrated to Asha and then the population just how profound a part of themselves they were giving up and had that be the big reveal. Showing wishes like flying, singing, or mountain climbing and then suggesting the lives of the people of Rosas were ultimately empty because they weren't doing those things suggests most people in this world who aren't eccentric billionaires are also living empty, unfulfilled lives out in the suburbs and cooped up in their workplaces.