So I've read alot and still kinda unsure about this->
Can S2 legendaries be played in this game? The packaging says it doesn't. But for example, stealth elf, I read she comes up as S1 version in the game, not with new colors. Just want to be sure...
Yes, they can be used but they come up as their regular counterpart. I think they did it so people don't expect them to come up as Legendary characters in SSA - much like the LightCore characters.
Legendary and LightCore Skylanders are compatible with Spyro's Adventure as long as they're Series 1 figures, although they'll appear as their regular counterparts as bionicle2809 had stated. I've tested this myself. I've actually been playing with my Legendary Stealth Elf on Spyro's Adventure recently and it just looks like a regular Stealth Elf.