I believe when seated, your feet should be flat on the ground with your legs straight (and not bent). At least that’s what I remember when I and my wife were fitted for our bikes. .
Nowhere near right. In order to get decent power, your leg should be slightly bent when the pedal is all the way at the bottom. Thus, you're going to be just about on tiptoe with your feet on the ground.
Old rule of thumb was inseam length minus 12" equals frame size, but nowadays it's probably more like 14".
Don't go big box store.
Starting out, you probably can't go wrong with Giant. They used to manufacture a lot of bikes sold by other brands. A LOT.
Good recommendation on going used.
