A few issues I have faced:1.

I've found many properties with title issues wind up with unpaid property taxes so checking on delinquent taxes, tax deed sales and lands available for taxes might help you identify some.

Will they "check themselves" from bad behavior when they see a professional company with professional services, legally reviewed lease, etc. managing their day-to-day?

If you do have to move because of a job, you would be safest (in my opinion, i am not giving legal advice or financial advice), i would sell that property to ensure that you did not just purchase with the goal of moving out early and taking advantage of lower rates and lower down payments for purchasing your home as a primary residence. 

For the proceeds I have to pay seller I would have to issue him a 1099 right?

I recommend legal advice from an attorney.

That is, they take the arrears, the late fees and any legal fees and they create a 2nd.

Alternative is the sherif evicts him and I pay tax and insurance.I know we can have a gentleman's agreement on these things, but im still afraid he might be able to legally sue me if we have a legitimate residential lease?

A good property manager will help to keep you out of legal trouble and also be a much-needed buffer for your new neighbors, who could turn out to be psychos. 

:)I am sure this is a solvable issue with some work.