1031 exchange eligibility

[Toby Sheehan]

Getting ready to move on from an investment property and looking for some advice.  Here are the particulars for my situation:

Property includes a duplex (we live in one unit and rent the other), commercial building/restaurant, waterfront house, Chalet and six cabins.  Purchased property 5 years ago for $850k, have claimed $30k depreciation to this point, invested $250k in basis eligible capital improvements.  Tax basis I'm calculating is $1.070m.  Soft offer from buyer for $2m with terms of seller finance; 500k down, 5% interest only payments for 5 years then balloon payment of 1.5m.  

Questions:

1.  Since we inhabited only the one half of duplex, how does that effect the capital gains relief of $500k for married taxpayers?

2.  Would $500k downpayment be taxable if used to pay off existing mortgage on property?

3. What would tax burden be year 1 without 1031 exchange?

4.  Is the 1031 exchange possible if I purchase a $500k property within the required deadline?

Thanks in advance.