Rumors exist. There is definitely evidence that the use of statins reduces the incidence of strokes and heart attacks. There have been isolated reports of carotid plaque (narrowing) shrinking with the use of statins but this has not been found true for everybody. Most people agree that statins work by "stabilizing" the plaque and preventing it from rupturing and causing a stroke. This is a hotly debated topic.
Yes. Reducing cholesterol may prevent plaque formation.