I would find it unlikely that there is no where that Barbary lions could be released. North Africa is a large area. Is the myth with most zoos just keeping large lions with luxurient manes, and not actually connected to the royal Ethiopian group?
1. I think one or two possible sites for a reintroduction scheme have been identified, but the general impression is that, as you say, the lions couldn't be released to live wild as there is nowhere remote enough nowadays to allow this.
2. The 'myth' is because DNA testing has shown at least some lions from the Rabat Zoo/Moroccan Royal group, previously regarded as the most 'pure' are in fact descended from SubSaharan lions, not North African ones.