I would recommend using 1.6 and South for now. 1.7 is at least nine months away, and who knows where the API will go in that time. You're probably better off developing a stable version of your project using 1.6/South, and then refactoring when 1.7 lands.

No: 1.7 is not stable and it's not like the current migration situation with South is a particularly large pain-point.

What I'd do is use South now and essentially rebase when you upgrade to 1.7 – ensure that your servers are current with South, remove it and start over with 1.7's built-in migrations.

Hard to answer, django 1.7 will take at least 9 months before become stable. You have(at minimum) to consider the calendar of your project.

1.7 It is not hard to keep up with changes. And it is easier to do them incrementally than have big jump which you never find time to do and end up lagging versions and huge technical debt.

Once your project is deployed then think about sticking with specific version. Development should be on the bleeding edge!