As far as the "rejected book makes good" thread idea--I know people who aren't writers, or only peripherally interested in writing for publication, don't know the ins and outs of publishing. They don't know how an agent works, they don't know how submitting works, or what an advance is...but every one of 'em knows that JK Rowling was rejected by a bunch of publishers, and that James Patterson's first book was rejected 26 times, or that Stephen King logged 30 "no's" before scoring a "yes."
Guess where they all place themselves?
I've been submitting for publication since 1996 and I still have the occasional gotcha fantasy that something I wrote that received a rejection letter would be picked up elsewhere and take the world by storm, causing the rejecting editor or agent to swoon against his or her desk, biting knuckles and in general, rue-ing the day they so callously rejected my genius (and that is about the time the Wet Dead Salmon of Reality knocks me back out of fantasyland...still, I dream).
And at Harlequin, I personally know of at least one writer (an RWA chapter member) who became a Harlequin author after several submissions, and who then was asked by her editor to re-submit some of those old rejected works. So that doesn't entirely put it outside the realm of possibility that something previously rejected by Harlequin (and their legendary database of submissions that logs everything they've ever gotten from anyone) would be picked up.
However--I do believe that DA or HqHo is playing this up as far too much of a selling point. Once again, taking a longshot and playing it up to sell dreams.
And yes, I do believe they are intentionally misleading. Publishing is a weird business. Where else in retail does a store's entire stock exist on consignment? Where else in manufacturing is generating the sheer waste of massive production runs (stripping) somehow more profitable than adopting a just-in-time manufacturing process (or really, *any* sort of lean manufacturing principles)? And where else is the R&D department (aka authors) independently contracted at a pittance and not paid until after everyone else gets a cut?
Publishing's a weird animal, and nobody wants to talk about money or numbers, so it's not at all shocking that even an author who's attempted to do homework could get caught up in one of these schemes.