Byrne was more than aware what would happen if he eliminated Superboy. He even had a plan that didn't require it. DC Editorial said go ahead and eliminate Superboy. Byrne asked about the impact on the LSH and Editoral told him don't worry about it they'll handle it.
I dont think PG was set up as Superman`s cousin in COIE. At the end they're mourning the deaths of the E-2 Superman and the E-1 Supergirl. They recall them and the old continuity. The end of COIE presents a very different universe than the one we see in Man of Steel and other books that started after COIE.
I didn't realize that story--I always assumed that it was an error on Byrne's part. I need to go back and read COIE but I do remember that it ends in as the effects to the timeline are still stabilizing. I'm pretty sure though that the scene with Power Girl and Superman strongly indicates that she just takes over Power Girl's role in the new world.