I believe this roster editing tutorial includes the necessary pointers:
viewtopic.php?f=268&t=110651I'll also move this topic into the Modding section for better visibility to folks who can provide further assistance on that front. Sorry I can't provide any further specifics myself!
As to why they do that with Legends, it all comes down to money. If certain historical players are exclusive to MyTEAM, the only way to play with them (custom rosters not withstanding) is to collect them, which usually means ripping open pack after pack, which is easier to do if you're spending money. With all the players they've licensed, they could easily expand the roster of retro teams, fill in gaps in the All-Time teams, and include something like NBA Live's old Legends Pool that would better facilitate all kinds of historical roster projects.
The problem is that none of that will make them money the way that recurrent revenue mechanics will, and indeed, it'll even hamper their ability to make money through a pushy approach to microtransactions. It's the same reason that the online team play modes don't have deep, proper matchmaking, and are hampered by low payouts and expensive upgrades. It's meant to frustrate people into spending money. If it doesn't facilitate the recurrent revenue mechanics, it's not going to be a priority. I'm sure a lot of the actual developers would be in favour of these things, but the suits call the shots.
To put it another way, adding some missing players to the All-Time teams will make hardcore basketball fans happy, but using those players to offer inaccurate but desirably overpowered MyTEAM cards will make them money.