That's interesting do you know any more about that law, and if it's still valid. From what I understood one of the Edwards? (I think) made a deal about it going to someone born in Wales also did not have English as his first language and made it so his son was born in Wales and since they spoke Norman French in court his first language wasn't English. I don't know how true that is though.
I'd be surprised if the English made such a law since they would want to consolidate power, having someone from outside be able to claim would threaten threaten that.
The euro-aristo project would know more about succession, but in English it's tricky lots of people have claimed to be in or out of the line, and it's been broken through conflict.
I think to answer your first question you wouldn't be able to claim a peerage based on ancestors having the title prince of Wales prior to its merging with the English crown because the title was taken for the English monarch to bestow, you would need a legitimate male descent (including going through first born rules) even if the title continues to exist in that way, that you might not be able to claim it anyway based on citizenship, and that they tend to keep close records who inherits peerages because of the rights attached to it. Plus you mention they thought the line died out, so once that happened the title would revert back to the crown anyway.
But I don't really know much in this area, so who knows, good luck for finding your answers though