I had a library of around 1000+ books; any book I couldn't get as a Kindle book, I had 1dollarscan.com scan. They did a phenomenal job.

No relation, just very satisfied with their results.

Is it allowed for all books? I've a few physical books that don't have digital versions, it would be nice to scan them and give the physical ones away.

I have yet to run into a book they wouldn't/couldn't scan.

I tried them and the results were not great. They didn't OCR it (though I think they do now?) and the resulting PDF was pretty much unreadable on my Kindle.

On my old Kindle, I found pdfs in general were pretty bad--how was it on a computer?

After a quick scan, it looked like you have to use their own reader? Surely not?

You misread. They give you a PDF. I think their "reader" is just a PDF viewer that includes the ability to download your books from their site.