Macbook Battery Replacement Problem(s)?

I recently got the message 'Replace Now' for my battery on my Macbook 5,1, so I took the battery out to find out the model number and found that the battery had expanded, as I had never really opened my macbook up myself I had thought for months that I had somehow warped the bottom of the casing. I booked an appointment with a Genius at the Apple store and he told me that 'they all do this' when they need to be replaced which I still don't really agree with and that to get a replacement, I would have to buy one for £101. I decided I would browse online before purchasing for that amount and found a brand new unopened A1280 battery on eBay for £50, the battery arrived and I installed it, I decided to do an SMC reset upon installation to make sure it got maximum charge and calibrated correctly with the Macbook but when using coconutBattery 2.8 it says design capacity 4100 mAh but my maximum is only 1271 mAh. The only thing I can think of is that it may have been purchased years ago and never charged and maybe loses some capacity over time?

Basically my main questions are:

- Do Macbook batteries indeed expand when needed to be replaced?

- Do Macbook A1280 batteries lose capacity if never used and remain idle in their box?

Any help or information appreciated.