This makes complete sense.
This is all about improving margin and provide better differentiation between 5S and 5. This also means 5S may be a minor upgrade compared to 5. So only way to sell more 5S is to dumb down 5, by replacing with it 5C.
There is significant proof that iPhone 5 was/is difficult to manufacture and thus margins are comparatively low. If they discount iPhone 5 by 100 dollars and 5S is not much different, most consumer will prefer 5 instead of 5S. 5S needs to stand-out compared to low priced option. As smartphone upgrades become more and more trivial, Apple has to come up with a permanent solution as current strategy of last-years-model will not work and lower its margin. New strategy is to come out with two new phones each year. One with plastic will less for 100$ and premium will sell for 200$. That way, even if 100$ is more successful in terms of sales, margins are preserved.
As for connector, they really don't care. They always said that it will be multi-year transition. Having unified screen size and aspect ratio has dubious benefits. Currently there is little problem with different sizes. Moreover, move to auto-layout means they are moving away from one-size for all phones anyway.