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A lot of new shorts have also jumped in when the old ones left. The old shorts haven't necessarily bought back in, especially if they're running cautious after getting their faces ripped off.

The cost of shorting the stock is a percentage of the cost of the stock on top of the stock price.

Kind of. But it really depends on your relationship and agreement with your prime broker.

And that price has declined by 80-90% in the last week along with the percentage cost to borrow. It's still expensive to borrow GME but if you have an idea that a stock is going from 500 to 0 in a week or two you don't care about the cost to borrow.

That is unlikely the case. Closing the short would require them to write massive losses. Their best strategy has always been wait it out. They most likely purchased a bunch of options to lock in their losses from getting worst and are waiting for the price to drop back down.