Well, the stroller is definitely far from perfect. To answer your question, the legs go into the basket. That solution, however, is not ideal for tall toddlers, this is better for very small age differences between the children. For an older sibling, unless she will somehow adjust even if not 100% comfortable, I would strongly suggest a different stroller, ideally a forward-facing-only side-by-side so that she has much) more space.
ABout the rain cover, unfortunately, the same issue, it is not designed as well. I would suggest, there, to get a universal double stroller rain cover somewhere on Amazon.