Yes, pretty much 100% of them rot away. I replaced mine with a piece of submersible hose, a brass tee on the bottom, and a wire mesh strainer around it to filter out out plastic pieces.
I don't know about replacing the hard line with rubber, but Mel (agnem) I know sells a braided stainless steel line that fits.
No the sending units don't need to be replaced, you just have to extend from the steel part of the line down to the bottom of the tank, as I described above. Also you can replace the electric float part with a universal gauge sender (as long as it's 78-10 ohms) so that your fuel gauge will be accurate again, I'll be doing this later this winter.