Yes, almost all buyers will test drive cars that you are selling in the £1000-£2000 range.
Its unlikely that you will be buying cars with reports in that price bracket. May be more sensible for you too look out for cheapies for sale privately so you can have a good viewing and a test drive.
You need to cover yourself with your paperwork. I'd highly recommend downloading the 'How to be a car dealer' guide on the forum as it'll give you much more helpful advice.
Every day is a school day, I don't consider myself an expert. There are a lot more experianced voices than mine on the forum, so pay attention to the advice given to you.
But first, insurance is a must. You'll need to to register with most auction houses, to collect your cars and run them too and from MOTs / garages, to test drive. Also, you'll be covered for SD&P on your own personal car too. When you work out the costs, you'll see that trade insurance is probably more cost effective than day insuring a car every time you want to use it.