RijndaelManaged is an algorithm while AES is the standard. When referring to AES256, does that mean the key length I'm using with RijndaelManaged must be 256 characters?
If I have a key like this:
key = "mytestkey";
which is only 9 characters, does that mean I'm using AES9?
Aes/Rijndael key sizes are in bits, not characters; AES256 uses a 256-bit key. You must give it a key that is exactly 256 bits. The AES standard and Rijndael only accept key sizes that are either 128, 192, or 256 bits.
You should not interchange AES and Rijndael. The AES standard is derived from Rijndael, but they are not exactly the same. If you wish to use AES, use AES for all operations; if you wish to use Rijndael, use Rijndael for all operations.
"mytestkey" cannot directly be a key to AES256 nor a similar Rijndael mode; it is not 256 bits long. In order to use it as a key, you'll have to transform it into a block of bytes that is 256 bits long.
If you're working with passwords, one typical means to do this is with key stretching, using hash algorithms such as PBKDF2 or Scrypt. PBKDF stands for "Password-based key derivation function", which is basically exactly what you're doing - deriving a key from a password.
Theoretically you could also just hash the password with SHA256 (which always has a 256-bit output) and use that 256-bit block as the key to AES; doing so is unwise from a security standpoint because it is relatively easy to precompute SHA hashes of passwords.
Please keep in mind that if you use a password that has very little entropy, then the security of your encryption suffers - the time it'll take for someone to guess the key could be short. "mytestkey" has at most ~42 bits of entropy - you're only using lower case letters, so 26 values per place, and there are 9 places (9 characters). Thus the number of bits theoretically needed to stores this is log_2( 26^9 ) = 42.3. In this circumstance, you'd be using AES256 with a key that has only ~42 bits of entropy.
I should note that the advice given here is an incomplete treatment of how to turn passwords into keys, from a security perspective. If you want to better understand how to properly generate keys from passwords, I suggest you start with some reading such as the Password Storage Cheat Sheet at owasp.org.