Is the only option to consume for [meager] hero skill points?
Also whats the best way to get legendary heros? Buy with gems? Then just consume all the trash?
I suggest keeping at least one of the legendary and elite heroes (the best) in case they get upgraded in the future as stats change. For the rest, the best option is to consume them as you said. The best way to get legendary heroes -- in my opinion -- is to use gems until you get about 3-4. After that, it may actually be faster to use shards to buy them. It is nearly impossible to get legendary heroes with HB, but not impossible.
Target selection is automatic and based on hero type and placement.
The quickest way to obtain Legendaries is to use gems to random them and then feed the other Heroes to them for ability EXP. But always make sure you check what talents your other Heroes have. A truly great talent can make even the most feeble looking Hero really strong.
Targeting is not able to be decided in mid battle yet. Your Heroes and troops will go to whatever the closest target is. The only time you get to choose their path is at the beginning when you drop them. A small orange and yellow cross-hairs will appear on the target that your troops and Heroes are headed towards as you drop them into battle.