The salesman is a knucklehead. The rocking back and forth is normal for ALL H1's (yes, even Alphas do it). The brakes are in-board, not on the wheels as in most vehicles, so you will have some flex in the half-shafts -- but the main reason is a bit of back-lash in the geared hubs. Do not fear, it's perfectly normal.
You need to go to Chuck Copelson's excellent site at
http://www.flashoffroad.com. There you will find answers to all your questions including year-to-year comparisons and what to watch out for when buying a used hummer.
As far as the #8 problem, any 6.5 turbo diesel from '96 to 99 (I've heard of some 2000's too) can be at risk. Poor coolant and air circulation + hot engine + bad cast = $$$. My '97 blew at 9500 miles! Labor + engine will run you between $10k and $14k. There are several cooling kits available to reduce the chances of cracking the block -- Chuck talks about them on his site and he sells one too.
http://www.bluehummer.com is also a great resource for info and parts. Where are you located?
good luck...study up before getting screwed by a bonehead dealer!
Ron B