1. For best of 3, you cannot change paragons between rounds. It is just best 2 out of 3 to win.
2. Legacy is kind of a team build mode. Both players choose 3 paragons and battle 1v1. If you lose with a paragon it is eliminated and then switch to one of the one's you have left. The first player to lose all 3 of their paragons loses but there is a fun twist. When you lose with a paragon you can take 1 of their abilities and replace the same type on your next paragon. When you are on your last paragon it can inherit 2 abilities, the one from your first and one from your second. Also some abilities will have text saying they can't be passed/inherited, also ultimate and passives can't be passed either.
Be mindful on BGA on your last paragon you will have to reselect the first ability you passed along with the one from you second paragon so they both pass over.