More natural would be "they used to have a dog." I don't know if this would be accepted or not.
That would be better. 'In the past they had a dog' is very awkward English.
Agreed. "They had a dog in the past" is slightly less awkward, but it's not currently accepted.
this is appropriate english
Be-avar, haya lahem kelev.
Should it not be pronounced "ba avaar" and not "be avar"