While I'm unfamiliar with Merc 2000 and have never read the lore for it I'll still give this a shot
A : This depends wildly on what basically boils down to how picky the militia can afford to be. Several factors can change this process. Building up a militia for a village in the backwoods of a European nation would be very different for recruiting a milita for a city of several thousand. More importantly is how dire the need for protection is. If a town is being subject to seemingly endless bandit raids and their are few travelers to hire, it's hard to say no to any man with a gun who seemingly really wants to help.
Of course there is the other end of the spectrum, where a city might be in a relative time of peace and there is an abundance of hungry people clamoring for the chance to join the ranks of the well-fed militia would cause the militia to be much more selective. Only people with demonstrable skill or able to pass certain tests/interviews or whatever, the process would be different for every militia.
B : This is answer varies just as wildly as the last, a ragtag group of 10-40 men who protect their local village will take what they can get. Those lucky enough to have military weapons likely don't have access to a lot of ammo for it so they use them very sparingly, and use cheaper weapons like pistols, hunting guns, and various small weapons like machetes.
If the militia is lucky enough to have the ability to produce not only ammunition, but new guns to fire it, they will typically be armed much like a conventional force. You're on the right track with easy to make stamped-receiver guns, another angle to consider is your militia might be armed by some sort of benefactor. A local politician, an intelligence service agent, or even local merchants/businessmen might arm the militia in agreement for protection or other, nastier motives. If this is the case you can give them almost whatever your heart desires, just consider what sources the benefactor would have access to. Consider what's common locally, and how much the milita/benefactor is willing to spend.
Don't forget mortars though, every militia that has access to even rudimentary manufacturing facilities can produce and maintain mortars, which are amazingly useful.
I sort of realized halfway through that your scenario likely isn't post-apocalyptic, so a lot of what I wrote won't help but I hope it wasn't a total waste lol.
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