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Once the ad is updated it is sent straight into pending status (ie not visible) until approved by admin, leaving the pre-edited ad listed would involve some pretty hefty coding

Seems to be a popular request among folks, so here it is (tested)

You will need to open up files:

includes/theme-emails.php
and
includes/theme-functions.php

Firstly in theme/email.php...

For the "from wordpress" issue you may check this plugin WordPress › Mail From « WordPress Plugins .

I think the Users tab in dashboard is what currently wordpress offers for the users email info access. The other way would be to directly access the database.