1. How should the Maryland rental income be reported for state tax purposes?

It's income on the Virginia return because they are Virginia residents.  It's also income on a nonresident Maryland return -- there is a reciprocity agreement between the two states (or should I say, between the commonwealth and the state?), but that applies only to earned income.

     2. Should he file a Maryland non-resident income tax return (Form 505)? Are there any specific issues or common pitfalls I should watch out for when preparing Form 505? Is there a way to double-check the form to ensure it’s completed accurately?

Maybe.  Is the federal gross income more than $29,200, excluding Social Security?  

Don't be afraid of out-of-state returns.  I once had a client who didn't feel comfortable preparing his own federal and resident state returns.  But he had worked several tax seasons for a Block office that assigned him to prepare returns for clients with multistate issues.  They were easy as pie, and that was before there was software (but store-bought crust was available).

       3. Can he claim a credit for taxes paid to Maryland on his Virginia resident return (Form 760)?

It usually turns out there is a rental loss and you don't have to worry about that.  But in the rare case where tax is owed to Maryland, some or all of it may be claimed as a credit on the Virginia return. Just follow the instructions.