1: Yes. If you let your brother play your PS3, you could convince him to rent games every once in a while. That way he'd have a console to play rented games on, and you'd have a nice flow of new rented games showing up at your house. Win/win.
2: Yes. Final Fantasy 7 is for noobs. Let her play it.
3: No. You did the right thing.
Overall: Yes.