Should it rotate? .................Yes, they are not keyed.
Should it move in/out easily? .....................They are an exact fit but should push in/out
Is there likely to have been any damage to hub through overheating? ......................... May be, but you may be lucky you will soon know if the seal has gone
Can I fit free off or need to fit new piston kit? ............... New kit, its sticking because the chrome is peeling off the old piston.
Is there a piston kit?.................. I would think so., but check out the price of a new caliper, that may be better for you.
Is it wise to do both rears?.................... Wise? may be but no need to do them at the same time.
After all that, I'll change fluid, normal bleeding procedure? ...................Yes longest pipe first unless a D2 is different.
A nice mornings job if/when the sun is shining