1. No. With any basis in nondeductible traditional IRA contributions involved, the pro rata calculation on Form 8606 must always be done even if the result is that the Roth conversion is entirely nontaxable.
2. All of the traditional IRAs owned by the individual, including rollover, SEP and SIMPLE IRAs, must be included in the pro rata calculation on that individual's Form 8606 (or Worksheet 1-1 from IRS Pub 590-B, when applicable).
In your case you apparently have a substantial amount in your traditional IRAs in excess of your basis due to having a rollover IRA. Only a fraction of your basis from your traditional IRAs would apply to your Roth conversion with the the rest of your basis remaining in your traditional IRAs to be applied to future distributions or Roth conversions.
In your wife's case, with the balance in your wife's traditional IRAs consisting mostly or entirely of basis in nondeductible traditional IRA contributions, it would probably make sense to convert everything and pay the tax on any amount in excess of the basis. The pro rata calculation would still be required on her Form 8606, but the result would be that all of the basis would be applied (limited to the amount converted if investment performance in her traditional IRAs has dropped the value in her traditional IRAs has dropped below her basis).
