I don't think the suggestion for Kubernetes in IoT is to run it on the Things, but for small local servers running services that work with the devices, instead of pushing all that in the cloud.
Rancher Employee here: One of the use cases we have been seeing is for stores, factories, oil wells, base stations, wind farms, etc. the apps people are trying to deploy to these now look much more like data center/micro services apps. Kafka, Redis, logstash, etc. K8s is really good for running these in a reliable and consistent way on potentially divergent hardware.
Not necessarily. I've seen some k8s on IOT industrial use cases where it made sense. Solar power stations were one example, IIRC.