Yes, the rear seats fold down.
The gen III is a nice car. Not as much out there as the Gen I/II as far as "stuff". If you want a cruiser thats ncie and comfortable, by all means.
I would not say any generation is more or less reliable. It is all depending on the maintenance habits of the previous owner. YOu are more likely to find a nice condition Gen III as they are newer. The problem you run into is the common Gen III issues. Transmission, if it is the stock one, WILL need to be replaced at some point. Even if it is not the stock one, as soon as you buy a gen III start putting aside for a new tranny. Struts, also if stock, likely need to be replaced at this point. There are a couple of options. You can go the cheaper route and put SLO KYB GR2s in (about 250 bucks) or you can put new SARC struts in (about 650 cheapest - just for the parts.) Coils will need to be replaced at some point to if they are stock. Coils run around 70 bucks, give or take, each. It is common practice to replace at least 4 at a time unless you want to do all 8 at once.
The cam weld is the big one. Since it has already been done, you would be in pretty good shape. Like any older car though, things will need replacing eventually.