In Delphi in my DLL do I have to allocate the return pchar of a function

When you return a string as PChar from function the string is held in stack, which is why it's sometimes corrupted. I use process heap memory for returning strings, or pointer to global buffer array of chars.

Also you can use built-in assembler and do this:

Function GetNameStr : PChar;
Asm
  Call   @OverText
  DB     'Some text',0
@OverText:
  Pop    EAX
End;

DLL and your main app have two different memory managers, so it is incorrect to allocate memory in DLL but free it in main app and vice versa.

You can use WideString type for returning string from dll or passing it to dll — WideString is a wrapper around system BSTR type and memory for WideString variables is allocated automatically by system memory manager.

Another solution is to use SimpleShareMem instead of ShareMem (Delphi 2007 and older only) — it works like ShareMem but does not need any borlnmm.dll-like libraries to redistribute.

The typical approach to this issue is to have the app allocate the memory and then pass it to the DLL to fill in (even better if the DLL allows the app to query how much memory it needs to allocate so it does not have to over-allocate memory):

function GetAString(Buffer: PChar; BufLen: Integer): Integer; stdcall;
var
  S: String;
begin
  S := SomeFuncThatReturnsString;
  Result := Min(BufLen, Length(S));
  if (Buffer <> nil) and (Result > 0) then
    Move(S[1], Buffer^, Result * SizeOf(Char));
end;

This allows the app to decide when and how to allocate the memory (stack versus heap, reusing memory blocks, etc):

var
  S: String;
begin
  SetLength(S, 256);
  SetLength(S, GetAString(PChar(S), 256));
  ...
end;

var
  S: String;
begin
  SetLength(S, GetAString(nil, 0));
  if Length(S) > 0 then GetAString(PChar(S), Length(S));
  ...
end;

var
  S: array[0..255] of Char;
  Len: Integer;
begin
  Len := GetAString(S, 256);
  ...
end;

If this is not an option for you, then you need to have the DLL allocate the memory, return it to the app for use, and then have the DLL export an additional function that the app can call when it is done to pass the pointer back to the DLL for freeing:

function GetAString: PChar; stdcall;
var
  S: String;
begin
  S := SomeFuncThatReturnsString;
  if S <> '' then
  begin
    Result := StrAlloc(Length(S)+1);
    StrPCopy(Result, S);
  end else
    Result := nil;
end;

procedure FreeAString(AStr: PChar); stdcall;
begin
  StrDispose(AStr);
end;

var
  S: PChar;
begin
  S := GetAString;
  if S <> nil then
  try
    ...
  finally
    FreeAString(S);
  end;
end;