Is it 'compulsory' that I can't use 蛸 in the word たこ焼き for 'octopus' and what would happen if I used it in a sign in Japan? Would police direct me to remove it?
For 外人, nothing specific is told about what happens to people who use Hyōgai kanji, or kanji outside of what's 'permitted' by the government.
Almost no Japanese people strictly remember which is a jōyō-kanji and which is not. Many hyōgai kanji are used by native speakers without even realizing it's so (e.g., 絆, 飴, 雫...). Of course, the police won't care, either.
Newspapers tend to follow the rule of not using hyōgai-kanji relatively strictly, but even newspaper publishers have their own lists of exceptional characters that are hyōgai but usable in articles.
That said, the spelling of takoyaki seen on signboards, Wikipedia articles and such is almost always たこ焼き (and rarely タコ焼き). If you used 蛸焼き, it would look simply unfamiliar, and some people might even wonder if you're selling something unusual.
What is (almost) regulated is mostly publishing, like books and magazines. The government punishes nobody for using rare kanji, but publishers tend to have in-house rules that are based on the government's recommendations, with different levels of internal enforcement.
Newspapers tend to be strict about that. Lenient publishers might just warn the author and ultimately let what they want to do, if the author persists. Publishers and authors are perfectly fine to do so.
That is just this non-expert's impression. For professional assessment, see https://kotobaken.jp/qa/yokuaru/qa-119/ (in Japanese).
