Your interpretation of $v(t)$ is correct. It is indeed the instantaneous velocity at time $t$. Now the idea is the following. The gravitational potential goes to zero for $r \rightarrow \infty$. Since the velocity is finite at all times, the average velocity $$\langle v \rangle = \frac{r}{t}$$ must also remain finite (where $t$ is the time passed since the launch of the projectile). Now, since $r\rightarrow\infty$, $\langle v \rangle$ can only remain finite if also $t\rightarrow\infty$. So that's a different way of showing why we let $t$ go to infinity.
Of course, you can look at it the other way around as well. Let $t$ approach infinity. Since we have a finite velocity at all times, the distance travelled $r$ will also approach infinity because the projectile has been travelling at a finite velocity for an infinite period of time.
Your reasoning for why $v \rightarrow 0$ is also correct. If the gravitational potential is zero, there is no need for any velocity. In fact, this defines the escape velocity. It is the velocity needed to come to an exact stop at an infinite distance away from the body you want to escape from (or, equivalently, at an infinite time after launch). The rest of the calculation is very straightforward and I think you didn't look for any help on that part so I'll leave it at this.