The answer to both those is:
1. Space isn't no consideration anymore, but it's also not the first consideration. Space only becomes a factor for advanced players who play for a really long time in one world. And expectations are that many of them will lose some continents. And there may be other things that we have to do as well, for players that want to push things to the 1000th degree (of which there are always some). I don't really know what to expect with this, because players always come up with ways to surprise me. I never expected that any player would manage to get a single wave in AI War that consisted of 16 million ships, but it happened. I never expected anyone to put over 120 hours into a single campaign, and push the AIP over 2000, but it happened.
So from that standpoint, I'm mostly deferring the space considerations until we actually have whatever crazy edge cases players come up with. In the meantime, the mission structure that we now have already will help to keep the chunk count lower, which is a big part of it. And there might be other things along those lines that we could do that would reduce or eliminate the need to remove old continents for space reasons, but that remains to be seen.
2. In terms of the continents being destroyed permanently, currently this is for thematic reasons. It's a way of losing that feels very permanent and notable, but without the entire progress of the world ending. It's also dead simple for us to do technically and design-wise, and for now that's the best route for this particular feature in my opinion. There are other parts of the game that are more in need of development time at the moment, and so we're focusing on those other bits. My expectation is that we might be doing something radically different and more complex post-1.0, but that there's only so much that we can push the scope right now. For me, having a really solid failure condition for not beating the overlord means that this one is in a pretty decent state at the moment. Not perfect, not the way I hope it is two years from now, but the way I think it probably should stay for now.