I'm not positive but, is it possible to have 65501 prefer 65502_65503 (using localpref on the 65501<->65502 transit connection) over 65503 direct routes learned via the regional exchange?

Yep, and you may even be able to do it yourself if they've implemented the RFC1998 stuff.

In this situation, all concerned have agreed that since 65501 is a common transit provider, it is not expected that they pref routes TO customers or customers of customers via the regional exchange.

In a perfect world (someone speak up if you know how to do this!) we could do this:

Have 65501 pref regional exchange routes to 65502 and 65503 for traffic originating inside of 65501 or from other 65501 transit customers.

Don't need to do that [typically non-standard thing] if you can do this:

Have 65501 pref the 65501<->65502 transit connection for traffic originating from outside their AS or their transit customers.

Again, the RFC1998 stuff, if supported by AS65501, will enable you [AS65502] to do this yourself. Of course, the above configurations tend to reduce the value of the Regional Exchange peering between AS65501 & AS65503, at least when considering the AS65503 ingress direction. They do still provide AS65503 with egress flexibility, as well as AS65503-AS65501 [non-transit] interconnectivity in the event that the AS65502 path becomes unavailable. -danny