1. Assuming the NOA for the DV based AOS petition was issued before the H1B transfer got denied, then yes you're still in legal status.
2. It shouldn't.
3. You will need to formally withdraw the current petition from USCIS before it gets adjudicated. However I've never heard of anyone withdraw a DV based AOS petition at this stage and changed to CP.
4. No, that's the end of the process. You can't reapply via CP, you only have one shot.
5. Speak with a competent immigration attorney.
6. Same as 5 above.
Looks like the chances of getting the approval for the AOS is tough at this point. I talked to few attorneys, and all of them have different opinions. Not many attorneys have dealt with a situation like this.I was able to find some information in the USCIS page. The below link (Sec E.1 2nd paragraph)clearly says that the AOS was filed inappropriately since the pending EOS case was denied
https://www.uscis.gov/policymanual/HTML/PolicyManual-Volume7-PartB-Chapter3.html
"
If USCIS ultimately approves the EOS or COS application, then the foreign national is considered to be in lawful immigration status on the date the adjustment application is filed. If USCIS denies the EOS or COS application, then the foreign national is generally considered to be in unlawful immigration status as of the expiration of the foreign national’s current nonimmigrant status and likewise on the date the adjustment application is filed. In this instance, the
INA 245(c)(2) bar would apply, unless an exemption is available. "
I think the only option left out is to withdraw the AOS, leave the country and initiate a consular process.
My Concerns for this step -
1)Do i need to repay the DV visa fees? I will call KCC center to confirm, but just wanted to know
2) Should I start a new DS 260 or ask KCC to reopen the same and update (the denial & other latest info)?
3)How long after filing the DS 260 would I get a interview? I can schedule the interview or KCC /USCIS schedules the interview?
4)Can I take the interview only from my home country or can I go to Canada or neighboring countries?
Is there a separate forum for Consular process DV?