You can't transfer a character that is too low to have a legacy. Characters must be at least level 10 to transfer, and legacy begins at level 10. They changed when legacy begins a while ago - I think it was when the game went F2P.
Nope - I transferred level 1 toons to each server and their legacies all transferred with them giving me an account wide legacy level of 30. Not that it matters - barely play at all since the transfer.
And here's a screeny for those who are skeptical.