Thank you so much does 1.0 work with this?
Yes and no.
So the game is largely divided up into two sections - the Toy Box (a LittleBigPlanet sort of "make your own levels/download the levels of others!" thing) and the playsets (a small game that's based around one property, like Monsters, Inc. or Spider-Man).
Characters from earlier versions can be played in the newer versions of the ToyBox with no issues. So if you grab 1.0 characters like, say, Jack Sparrow and want to make levels as him or play ToyBox stuff with him, that'll 100% work.
But the playsets aren't forward compatible. So the Monsters, Inc and Pirates of the Caribbean playsets from 1.0? Some of the item unlocks from those playsets are still hanging around, but the playsets themselves only work with the Disney Infinity 1.0 disk.
TL;DR: Characters are always forward compatible (at least so far) but the playsets are not.
Also none are out of print right?
Kind of? I'm pretty sure they're not still manufacturing characters from gen 1 or gen 2 anymore, but they're also not exactly Amiibos in terms of their rarity.
You may have to turn to Amazon or eBay or some other online retailer to get the older figures, since bigbox stores don't like the amount of shelf space they take up in their electronics sections. And you may end paying a bit more than the original retail price for a new-in-box character at this point. But they're definitely available, and not at obscene Amiibo prices (I'm looking at you, $70 Splatoon Amiibo pack).
Edit: Okay yeah, looking at Syndrome the current going price on Amazon is $21, Francesco is $20, and Violet seems to be hard to find. So a
few of the older gen 1 figures might be on the pricy side or hard to get at this point.