You want a tank with a liquid withdrawal line or "wet leg". I have seen 500 gal tanks with no wet leg, so no.
There's not much to go wrong with one as long as it's not been open to the weather. A "rebuilt" one should have a new relief valve and hand valves and the gauge should be checked.
Not sure on the legalities. I've heard companies say things like that before so they can discourage you and avoid any liability. If it's _your_ tank and _your_ propane in the tank I don't see how it could be illegal for you to use it!
Now it may be illegal for you to fill a smaller tank and then transport it over the highway, and the knucklehead at the counter may be interpreting the law to mean you can't fill anything. I wouldn't worry about it.
The 250 psi is a nominal test rating for propane tanks. How much liquid you can put in depends on the ambient temperature. Typically they will fill to 85% and the tank will be fine even on a 100 degree day.