I was wondering if, once I dire level my Rainbow Phoenix to level 20, then i turn it in at the menagerie, will it spawn after that as a level 20 dire pet or will it remain a level 5 spawn?
All the lvl 20 pets you turn in always appear as lvl 5 afterwords but you can ask Wynn to give you a lvl 20 with whatever evolution you want (if the one you turned in wasn't elder)
No, you can't have a rainbow phoenix on your hero's.
When you talk to the tamer/identifier dude/chick (don't remember what it was) with your L20 pet active (ie. have charm animal equipped), it will unlock the level 20 phoenixes in every evolution apart from elder. If you then enter again all alone, you can talk to the spawn dude and get lev20 rainbow phoenixes in every evolution spawned.