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...how much space do they need in the ground.
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No closer than 6', 10' better. If you already have something shorter that likes partial shade, that's the best of both worlds, you can hammer them in between.
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...my dad wants to make it more of a foresty environment.
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..and a 10'-15' tall tree-like plant isn't enough of a tree?
Think of them more as a "temporary" type plant, they're fast growers but don't last all that long, Hawaiian varieties can be treated more like a 2-year event. (unlike their Mexican cousins that can get 20'+ tall & take a couple years to fruit.)
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...how long do saved papaya seeds usually last?
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I'd expect fresh seed to maintain at least 80% viability at 2 years. It's not worth saving them any longer than that, with fresh seed being very easy to come by.