Hi Fyre Byrde, I am certain my answers here are correct:
1) That is totally fine. They can also invite witches, mermaids, aliens and ghosts to live with them. Genies, Fairies, Werewolves and Vampires can't be a member of your household.
2) For Generation 2-7, the heir is the first born natural birth to two sims living in your house, one of which has to be the founder/heir 2-6 ie founder and spouse --> generation 2; generation 2 and spouse --> generation 3 through to generation 6 and spouse --> generation 7. Generation 7 has to be female and have a spouse who lives outside the house due to space restrictions. After the first born, you are free to have your targeted immortals (any other sims of the appropriate life stages) to produce as many offspring as you like, and with sims inside/outside of your family. Remember, as soon as a sim moves into your controlled family, they can't move out until they die. So, if you bring in Claire Ursine, you also have her daughter, and the daughter has to be there until she dies. If your founder's/targeted immortal's pregnancy results in a multiple birth, the first named nooboo is the heir.
Thank you Zyffyr, I may keep UC off my laptop for the time being then.