Hi,
I work at Lyft. To answer your questions:
1) There is added cost, though it varies depending on how many things Envoy is configured to do (e.g., logging, tracing, stats, rate limiting, health checking, etc.). Even in complex scenarios (Envoy being used to proxy both inbound connections into a service, as well as proxy outbound connections to Mongo or Dynamo), we measure Envoy overhead to be < 1ms, which for almost all applications is negligible. There are definitely certain cases where this might be prohibitive, but in general we find the common functionality we get (again stats, tracing, etc.) to be invaluable in a production setting.
2) Envoy supports hot restart (https://lyft.github.io/envoy/docs/intro/arch_overview/hot_re...), as well as graceful drain of existing connections, so there is limited/no impact to existing clients. There is one enhancement that we would like to make to our HTTP/2 graceful draining to make it even more seamless, but that is more complicated than I can type here. :)
3) Right now Envoy does not support HTTP/2 priority so all streams are treated equally. We are currently working on priority support at the routing layer, with different connection pools available for high and low priority traffic, as well as circuit breaking settings. In the future we will likely merge this back into a single HTTP/2 connection with proper priority support. In practice though, within the DC, head of line blocking at the TCP layer isn't too much of an issue.