I agree with Menagerie that you should not be adding anything else to your tank at present. It also sounds like your LFS
employees are morons, IMO
You may want to think about getting some java ferns and java moss for the tank, as these are low-light plants that will both aid your fish and look pleasing aesthetically. Think about some larger silk plants too, with leaves of a size that the betta can rest upon. If you have to make a choice between moss and fern, I would go with the fern, as it is the one I have found hardest to kill (and I have very little luck with plants).
Running the tank by itself does nothing. The bacteria that break down fish waste have to be introduced through an organic source such as new fish, plants, gravel/media from an established tank, or other means. They then have to be maintained by the introduction of their "food," which is foremost the Ammonia secreted as part of fish doodoo. One set of bacteria consumes the Ammonia and converts it to Nitrite, the next set of bacteria takes it from Nitrite to Nitrate. Live plants are helpful here because they will also consume these waste particles. (I apologize if this is retreading information you already know.)
Your filter comes into this neat little circle by providing both mechanical filtration (i.e. actually removing bits of organic and other detritus from the water via the filter pad) and biological filtration-- it provides a home for the bacteria, which grow on surfaces in the aquarium rather than in the water. This is why "bio-wheels" are very popular on freshwater filters, because their continuous rotation oxygenates the bacterial colonies and also helps prevent mini-cycles whenever you change out your filter pad. In effect your filter does not reduce your bioload- it is merely how we deal with it outside of frequent partial water changes. Also depending on what your filter media consists of it can provide chemical filtration as well (ex. removing medications and tannins from driftwood).
The return water from the filter doesn't matter either way. It's just important to keep the majority of your water surface disturbed and moving the whole time, but at least in one area not so hard that it makes it difficult for your betta to get to the surface and breathe.
tanks are always going to be overcrowded because the fish are only going to be there a short time.
Using filters of higher rating than seems necessary is common both in the hobby and at the store- many people believe that you can never have too much filtration. =)
Bettas live in rice paddies and other shallow, wide bodies of water. You are correct in believing that a cup is a very poor home for one. The cup system relies on the myth that bettas live in ditches or hoofprints filled with water and the fact that many pet store managers believe what yours told you- that bettas will attack any other fish they come across. I visited a pet store last week and saw a betta that had escaped its clip-on "house" and was swimming around peacefully in a community of corydoras. An employee walked by, saw it, and immediately freaked out before chasing it around the tank with a net and putting it into a cup. She explained to me that it was only a matter of time before the "vicious fish" attacked the cats below.
Picking out healthy fish is a skill that is best gained through experience, but in general: 1) Don't select fish that have redness around the gills, visible parasites such as ich, emanciated guts, or that are floating or swimming strangely. 2) Ask for a feeding demonstration and examine how much vigor the fish you are looking at exhibits when trying to get food. Keep in mind that some fish may vary on this point depending on their habits (such as some of the nocturnal catfish), but tetras, livebearers, cichlids, and most other "open swimmers" should react. 3) A lack of vivid coloration can be a sign of illness, but it can also simply be stress or due to the fish's age or sex. Avoid fish that have an obvious pallid or white surface, but also do not leap for the brightest fish in a flock simply because it is more colorful than the others. Some fish can also become darker when they get sick.
. Sounds like you are on the right track.