> Sony will give me up to 100 classics
With the classics, also check the "E-Books" on this site - Menu near the top of the page - the same content but better formatted.
For more info, check the wiki - http://wiki.mobileread.com/wiki/PRS700
> Can i get a list of which formats should i look for when browsing to purchase? (without reformatting)
LRF, LRX, ePub, PDF, RTF, TXT
> Which formats can i convert to work with my reader?
LIT, PRC, HTML, at least
> Are some easier than others?
HTML - trivial, LIT - easy, but a bit involved the first time, PRC - a bit trickier the first time
> What programs do i need to use to do this?
Calibre, plus "ConvertLIT GUI" if the LIT is DRMed or mobidedrm if the PRC is DRMed
> Where would i get these programs?
> What are the problems associated with buying in one format, then converting to another?
Mainly, finding the info / tools needed...
> What are the legalities of doing this?
Country-specific, so it depends on your location.