a) more efficient processors don't instant-obsolete existing ones. An ASIC on a smaller process in theory will have roughly double the efficiency (MH/$ and MH/W). In reality it is much less maybe closer to 150%. That doesn't make existing chips unprofitable .... just less profitable.
Yes, because efficiency is irrelevant to some people, because they have free or almost free power. Some countries have power that is almost so cheap its not worth metering, and in some places, they actually do that.
Also, where I live (Australia) there are a LOT of people who adopted solar when they were being offered lovely 200% feedback tarrifs. But with network saturation and policy changes these are lowering a lot in some places, and in the future, they may be 1:1 with the consumption tarrif and worryingly perhaps even lower. In this case, a clever miner could better utilise that power to run an ASIC farm. In other threads it has already been shown that with some moderate levels of ingenuity (usually involving a RPi and some erupters) you can even run mining systems directly from the panels themselves.
Of course, people living in dorm rooms and renters of properties that have included power / free power are more numerous and those people also won't care much for efficiency. They are essentially making free coins with that power, you could argue the ethics of this if you wanted to, but ethics usually matter little when there's money to be made and loopholes that can be jumped through.
I'd be willing to bet that even in 12-24 months time there will still be people around the place mining with FPGA's and AM USB erupters, even if difficultly increases in the worse case scenarios. Yes, those devices might have to be sold by some people but they'll find new homes where electricity is cheap. Hell, I'll bet that some people will still mine bitcoin on GPUs: free heat and easier setup/tweaking than scrypt will attract at least a few people. And then, there are those who are into the conceptual, theoretical, and ideological aspects of bitcoin who don't care about efficiency or even profitability at all.
