I have created a web template based on Team site. Is it possible to have custom Page Layout for this web template? I have heard that it is not possible to have custom page layout for teams sites. thanks
You can use page layouts on team site, but you have to activate publishing features on the team site (so basically you could just have used one of the publishing site templates like cms as base for your web template).
I usually base my web templates on sts and then activate the site and web scoped publishing features on it via the onet,xml