Han Solo's activation takes place before player's who have initiative, correct? So if the rebels are second player, they can activate Han and use him before the first player can activate his first ship. And it does not count as a ship activation, just an activated squadron, correct?

Correct on both points. The only time Han doesn't go first is if you're second player, and first player also has Han, and wants to activate him first.

In which case, Han still goes first... just not your Han.

Etiquette question: how should I declare that I intend to use Han as 2nd player? Just state it while we set dials, or wait until dials are complete, but before 1P activates his first ship?

Well, in every game, you should both declare that you're finished setting dials before moving on to the beginning of player 1's first activation. In practice, that's not particularly necessary as long as P2 is done setting his dials before P1 flips his first dial. In games where Han is in play, though, I make a point to enforce this, to make sure P2 always has the opportunity to activate Han first.

If I'm P2, plan to activate Han, but P1 starts flipping dials before giving me the opportunity to activate Han, I think it's perfectly legitimate to call him on it under the Tourney Regs:

Players are expected to follow the game’s rules, remembering to
perform actions and use card effects when indicated. If a player
forgets to use an effect during the timing specified by that effect,
he or she cannot retroactively use it without the consent of his
or her opponent. Players are expected to act with respect and
not intentionally distract or rush an opponent with the intent of
forcing a missed opportunity.

If you're clear upfront about declaring the end of the Command Phase every time and P1 still rolls directly into activations, that's rushing an opponent. It's pretty common to forget to give that opportunity because it so rarely comes up, but I find most people are amenable to backing up to let you activate Han as long as you're 1) clear in advance that you're enforcing the end of the Command Phase, and 2) quick to call them on the missed opportunity.

Is it legal for:

1st player: Activate Han

1st player: Activate ship

2nd player: Activate a ship

Provided that the first person doesn't have the squadron command as his first command dial?

Yes.

Han is able to activate, before all ships, on his own, as if he was given a squadron command.

Then, when Han is done doing Han things, like shooting first, the game Resumes exactly where it was before Han did anything...

Which will be the activation of the 1st Ship by the 1st Player.

ok thank you