I was a Mechanical Engineering student too! UVA is a fantastic school and I know they have a really excellent Bioengineering program too! You have some excellent questions!
1) First off, I'm a Patent Examiner, so I'm not familiar with the hiring for other types of jobs in the USPTO (like Patent Attorneys, Trademark Examiners, or any other administrative/legal positions). I can only speak to Patent Examiners. The USPTO hires people with all levels of education and experience. Having only a Bachelor's degree would put you at the lowest level/grade at which Patent Examiners are hired, GS-5. Having a higher GPA will possibly help you get in at a higher step within GS-5 (this is not official, but based on what I gather from others who entered the USPTO at the same time as I did). Masters are probably hired at the GS-7 level, and PhDs (or people with industry experience) are typically at the GS-9 level. Those who have worked previously in the USPTO or in patent law firms (i.e. patent prosecution experience) will likely get hired at GS-11 or potentially higher.
2) We are quite limited in the type of patents we examine. Of course, how do you define "limited"? It's interesting that you ask about biomedical devices, since I fall into that category. However, I imagine you'd never think of diapers as medical devices. Half of my work load relates to diapers/waste-handling; the second largest group I examine is wound suction/irrigation systems and drug application to skin surface; somewhat infrequently I also examine dialysis systems and connectors used for IVs/vials/syringes. My office mate of 3 years was in a different unit, and he examined injection devices. Another friend down the hall from my office was examining medical imaging devices. So we each have a somewhat narrow field of patent applications to look at. Honestly, we all initially felt that we were looking at patent applications that are not quite in our field. But if you think about it, the same engineering concepts apply to all of these devices/systems so in a broad sense, we are totally doing things in our field. As far as I know, we all got into our units because of our bioengineering background/research, so the USPTO does a decent job at matching experience to the job openings. As technology evolves over time, some units will shrink and some units will expand quickly, so an examiner will switch to a different unit to pick up a new field (required by management needs), but generally there are very very few examiners changing units.
3) To be fair, the job of a Patent Examiner is really really good. The first two years at the USPTO are generally quite tough, based on my own experience and those around me. The good news is that most people still get through the ranks just fine. Particularly for those joining the USPTO straight out of college, one generally can get from GS-5 to GS-12 in four years. After that there are some exams and programs that one goes through (just tough enough to make some people “park” at GS-12) in order to get promoted to GS-14, and then beyond that one would no longer be examining patents, but be a manager or involved in other legal/training functions in the USPTO (which is yet another big hurdle for many). During that time, most have become comfortable with the job, the pay is good, and there is tremendous flexibility in work schedule. In the last 7 years at the USPTO, I have only come across one person who says she loves examining patents (examining patents is rather monotonous but that’s why it’s predictable and easy to handle after some getting used to). I can’t tell you what is most important to you, but overwhelming majority of the patent examiners will tell you that this is a good job: job expectations are well-defined, job performance criteria is very clear, working hours are extremely flexible, the pay is quite good, and we never for once feared that we would get laid off even during these tough economic times. For the foreseeable future I’ll stay a Patent Examiner, since it gives me the flexibility and job predictability. Currently I don’t have opportunities to do other things in the USPTO (i.e. besides examining patents) because I work from home far from the USPTO main campus, but it’s a choice I made (to work remotely) and as the USPTO opens up more satellite offices, more possibilities will arise in the future.
I may have gone on for too long, but hopefully my answers can help you with an easier time in making these tough life decisions. Another side note: there is a Law School Clinic program at the USPTO for law students to have hands-on experience in patent prosecution. Look that up and see if that may be in your future. Best of luck!