1. You get what you pay for. No matter how you cut it. Free shipping goes to the bottom of the pile. The more you pay for shipping the higher the priority. The exeption are prime customers who fall in the 2 day shipping category automatically.
2. See point 1.
3. Fed ex and UPS charge a heavy primium for one day shipping no matter what. Yes it may be cheaper to send it from say Dallas to Houston than say from the East Coast to Houston but the difference in cost to Amazon is pretty little. Most of that cost is over night is fairly costly and UPS charges a premium for it.
On top of that the over night stuff is more expensive to get to. it gets put at the top of the pile for warehouse staff. They have to get pulled off what they are doing to go get that item and put it on the truck. The other items can be done more systematically. That means a crew can start at 1 end of the warehouse and work to the other grabbing the items needed or based on wear they are going. It more effience in the handling the department.
Those cost can not be reduced no matter what. It cost Amazon more to have the crew get the over night items, and it cost them more to get those same items.
Maybe I should have taken a course in logistics. Thanks for your explanation.