If that oil tank is buried by all means remove it or demand it be removed before you take possesion. If it is leaking it could cost you very very large dollars for the cleanup.
Using the hole for a dry well is a good idea.
If you go for the water and sewer hookup using the septic tank or at least the drain field for the downspouts is a good idea also. You may be required to fill the septic tank if you hook up to the sewer.

The liability of a 2000 gal buried oil tank is enormous. At a minimum I would have the current owners have the tank tested and certified that it is not leaking. This should be done long before you close on the house. If it's leaking the cost of cleanup could easily top $100,000.
Here in NY you can abanbon a tank as opposed to removing it. That entails pumping out the oil. Opening up the tank and cleaning out the sludge. Wiping it clean and filling it with sand. It cost me $900. to abandon a 500 gal tank in 1999.
Ron

Unfortunately for me, the oil tank was not one of the contingencies. So now I have to two options. Either drain and fill in the tank, or have it removed. Here residential tanks are not regulated, but have to be reported if any leakage is noticed during removal.

I got a quote for about $3000 just for the soil test and report. I also got a $3500 quote to remove the tank. My guess is that it's currently not leaking, otherwise the well water or neighbors would have been affected.

I would definitely, get two or three quotes, or more for the test to see if it's leaking, call the better business bureau, make sure the contractor has insurance, and ask to speak to some of there past customers. This is a politically correct approach, 99.9% of reputable contractors will gladly let you speak to some of there customers as references. You want to be sure that it's not leaking!, you don't want a contractor to pull it out and then surprise it was leaking and next thing you know you slammed with a whopping bill to clean it up.

The sinking sidewalk, call a concrete raising company, or concrete leveling company, they pump under the concrete and it raises back up, then seal the seam along the foundation. A french drain would be good if you have a lot of water coming in, But the french drain needs to go along the wall. and if the sidewalk is next to the wall , well it would have to be dug up to place the french drain in.

Concrete raising is economical, and works great!, Seal the seam along the foundation with a top quality concrete caulk, make sure the gutters work good, and the ground slopes away from the home. This should solve the water problem.

Additionally, if the concrete in the basement is not painted, you can get a product called RADON SEAL, it sprays on like water, using a regular hand held garden sprayer. Seal and cracks with hydraulic cement, use a cold chisel to open the cracks up a bit so the hydraulic cement has a good gap to fill about an inch. let that dry according to the manufacturer, then spray the Radon Seal. This product is absolutely the best water sealing product you will find for concrete basements. Must be bare concrete (no paint). can be painted after or what ever. never comes off, Radon Seal creates a molecular bond with the concrete and actually changes the molecular density. http://www.Radonseal.com

All the ideas you have sound good. Depending on the amount of water, I don't believe a french drain would be necessary, but installing one could never hurt. Like I said I would raise the concrete and slope it away from the home.

hautinglu-
Unfortunately, your assumption that it's not leaking because you haven't noticed pollution is not a very safe one. If you have an oil tank that's been in the ground for more than 30 years, there's a good possibility that it has rusted through somewhere. If so, the contamination may simply not yet have migrated far enough to be noticeable. In any case, it's not a question of whether the tank will leak, it's when. With tanks that are in active use, you can sometimes get tank insurance from the oil delivery company that would cover cleanup costs if there is a problem. If you don't have this, you should give your situation further thought.

Also, you need to talk to more folks about removal costs. Your local or State health/environmental office should have a list of qualified oil tank testing and removal specialists. I would be suspicious of any firm that wanted $3000 for soil testing alone...that's way too high.

And here is a recent thread that will provide more info on the matter of tank removal.

Here is a link that might be useful: Remove underground tank or leave it

Thanks kudzu.

I'm still exploring all my options. The thread that you linked to was the one I originally came across when researching the subject.

The company that I called doesn't really do residential soil tests. But I've had a hard time finding a local company that does. But I'll get in touch with the oil delivery company about insurance.

hautinglu-
The most reliable soil tests are those taken right under the tank, so it's often cheapest to do it when you've decided to take out the tank and want to document that the soil is clean, or that contamination (hopefully) hasn't traveled much. If your tank is located away from structures, then any contamination is easier and cheaper to deal with, unless it's traveled to an aquifer. In my case I was told that, if there was contamination, I had two options: 1) the dirt could be excavated out, spread on the ground, and the volatile compounds could be allowed to evaporate over time...but that could take over a year; or 2) pay for disposal by the cubic yard at a hazardous waste site (pricey). Where it gets even more expensive is where contamination has seeped under the foundation of an adjacent building and has to be removed.