Considering a simple example:
$$\frac{5x^2}{3x}\ \ \ \ \ over\ GF(7)$$ one way to do it would be:
$$\frac{5}{3} x$$ $$\Rightarrow 5 \times 3^{-1}x$$ $$\Rightarrow 4x$$
But, I tried performing long division performing long division goes like this:
Is this the correct way to perform long division over GF(p)?
And during multiplication of two polynomials with coefficients over GF(p), can the resultant polynomial reach any order or is it reduced via some irreducible polynomial like in GF(p^n)?
There are limited resources that demonstrate division over GF(p).

I believe the definition of $GF(p)$ is that it is the finite field of order $p$. In particular this is a field, so it has no zero divisors. So if I multiply two polynomials then the degree of the product is going to be the sum of the individual degrees.
I think you may be confused with the polynomial used to define $GF(p^n)$ in some literature. In particular the finite field $GF(p)$ for $p$ prime is easy to visualize, as this is just $\mathbb Z / n \mathbb Z$. Then usually to define $GF(p^n)$ one takes a degree $n$ irreducible monic polynomial $f$ in $GF(p)[X]$, so that $GF(p^n) \simeq GF(p)[X] / (f)$. This polynomial $f$ has nothing to do with polynomials with coefficients in $GF(p^n)$.