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As for issue 2, I believe it is a simple matter of multiple session factories, one for each database. I then have DAOs use the correction session factory.
Yes, this is indeed correct. Just create multiple session factories with individualized hibernate_dbx.cfg.xml files, and make sure the DAOs are associated with the appropriate session factory. A bit of work, but not too much.
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As for issue 3, do I need to do a deep copy? Or there other means of taking an object from DB A, sanitizing it and then creating a new instances in DB B?
Indeed, a deep copy will be needed to ensure you don't lose any data.
You can always entertain Hibernate Shards as well.
Good luck!