I have a hunch the update will be free, but the ability to get out of the pilots chair would require purchasing a DLC (except for LP's of course).
Like I said, my hunch is much of the current feature code will be transplanted into the new core engine. The bugs they are fixing now are likely to routines which will simply be migrated directly into the new game, so it's not wasted work.
To us it would likely appear to be a substantial overhaul to the current game, but under the hood it would really be a total rewrite and replacement of a lot of the game's core. Sometimes in software dev this is the most efficient way to fix horrible spaghetti code which is prone to breaking often. Fixing lots of bugs is sometimes much more work than simply rewriting the foundation anew instead.
Again, just my gut feeling on what's going on behind the scenes at FDev. We might simply end up getting very minor updates after all this time. I could be overzealous with my expectations.
In any case, it's premature to "abandon it". Wait to see what the end of 2020 brings to the game.
Completely new code? Unlikely. What's more likely is that Frontier will build in some of the updates from other games using Cobra as an engine. Depending on how the existing code is written, adding a basic first-person view wouldn't be at all hard. Recode some view parameters, attach a 'walking' animation to the camera and off you go. Again, depending on existing codebase, station interiors could be done with existing models with additional LOD data. Now, I am making an assumption that the code was written with this eventuality in mind, but given the roadmap Frontier announced and mostly followed, it's a reasonable assumption.