1. They already have the 4in Architecture down pat with the 5S they just need to add in the NFC chip for Apple pay. Doing this will save them money and increase margins big time because the phone still will be highly priced.
There's no reason the A7 is cheaper to produce than the A8. In fact, due to smaller die size, the A8 may well be cheaper to produce.
2. Redesigning the 6 to fit in a 4in chassis is not cost effective at this point. Again, it's all about the money.
It's a new design either way, whichever chip you use. And if you're doing a new design, might as well use the A8 so you don't have to redesign it again next year.