"First, can a S-Corp own a LLC and if so can it transfer assetts into the LLC with negative tax issues?"
S-Corporation is a tax term. Under state law, it's just a corporation like any other. A corporation can own a LLC and this happens all the time. There is no rule in the federal tax law that prohibits a S-corporation from owning a LLC either. A LLC is that 100% owned by the S-corp is ignored under federal tax law (known as a "disregarded entity") and is instead treated as simply a branch or division of the S-corporation. As a result, the S-corporation can transfer any asset it has to its wholly owned LLC without any federal tax consequences whatsoever.
"Second, would I be able to sale a partial intrest in the LLC as a way to raise capitol for the S-Corp without dilution for the parent S-Corp?"
Well, you couldn't sell the interest in the LLC since you don't own the shares, but the S-corporation could. Doing that, however, turns the LLC into a partnership for federal tax purposes and will have tax consequences for the S-corporation and its shareholders. A tax attorney should be consulted to guide you through that.
Further, I cannot imagine anyone buying into the LLC without getting a share of it, so the S-corporation's interest in the LLC would, of course, be diluted in the process. That would not, however, affect at all the ownership of the S-corporation.
There may be issues relating to the sale of a security that the S-corporation will have to be concerned about in selling the LLC interests and it would be a good idea to consult a security lawyer regarding that aspect of it.