1. Would it be possible to emulate the object selection circle?

    Basically, I want a texture to be displayed at the feet of the character, but to also scale with camera angle, similar to the object selection circle.

    Not without an incredible amount of work.

    Check out this addon; it does something similar. It is incapable of handling uneven surfaces or walls, however: http://www.wowinterface.com/downloads/info16249-AVR.html

    Indeed, and the techniques used are very much non-trivial =)