Yes. It is very old-fashioned, but not incorrect. The subject of a second person imperative is normally omitted nowadays, but was commonly included in the past. We used to say Go you now, and Sit you down, for example. Many frequently used expressions retain archaic and even obsolete forms, and "believe you me" is one such.
Yes. It would not have been, but having been in use for almost a century, it is now. You see, it became a phrase used for emphasis, and as such, doesn't have to follow the exact rules.
That said, many do find it annoying, and it generally connotes a lower educational level of the user, who is blissfully unaware that there could be any controversy about it.
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