When is the best time for us to marry?
Any time. Better yet, about 3-4 months before the end of your OPT.
Is it true that I have to apply for a staus change 3 months before my OPT ends, so that my status is uninterrupted?
No. You should apply for adjustment of status about 3.5-4 months before your OPT ends if you want to WORK without interruption, because it takes about 2-4 months to get a work permit based on AOS. Other than that you should apply for AOS about 3 weeks before your OPT expires. Try not to do it after it expires. Just in case.
What would we need to file? When would we need to file it?
You will need a copy of a marriage certificate and your birth certificate. Your USC spouse will need his birth certificate or a certificate of naturalization, or US passport. As to when - see answer above.
If we marry in his home state but live in another where would need to file papers and have this immigration interview?
everybody now has to file with the Chicago lockbox, except people in Dallas, TX. Read the instructions in form I-485. Do send I-130 and I-485 together in one package. The interview will be in the district you reside in. Every time you change address, you are required to send form AR-11. Better move first, and then file all the papers, otherwise they may get lost.
At what stage should we seek legal advice
you have never been illegal. Why would you need legal advice? If you can fill your papers yourself (anybody who speaks English will do it with relative ease), then you don't need to pay a lot of money to someone to do it for you.