It's true, and yes, you will be assessed the penalty if you are unable to replace the funds you borrowed against your 401k.

All this is usually very clearly explained within the plan documents.

You are very much required to pay back the loan, or it will both be considered income and come under the 10% early withdrawal penalty. The only options I have heard of people doing in the same situation are all ugly choices.
1. Borrow what you still owe from a relative to pay it back.
2. Borrow the loan amount from a credit union or bank to pay it down.
3. Sell stuff to cover the loan; Cars, expensive toys, and the like.

None of which are great options considering you can't really afford to take out a loan when you are laid off. At the same time you would just be avoiding a large tax hit, in exchange for a larger loan. Wish I had more information to help you with.

Yes, you are correct. It is considered a taxable withdrawal
and is due in full. Also, if you pay it off in full you'll have to
use taxed money. Then when you withdraw again you'll have
to pay taxes on the money, again.

My last employer would add stocks to my 401K.
Otherwise, I avoid them.

First of all I'm sorry this situation has happened to you. I think you are stuck on this one. I wish I had better news but I believe that you will have to come up with the remainder of the loan since you got laid off plus 10% penalties. However I you should be able to pay this over time as it's due to the IRS and most bills due to the IRS have Installment agreements (Form 9465) or payment plans that can be set up if you are unable to pay them all at once.
I think you should call them and find out I think that would be your best bet. Good Luck.