The interest is generated from inflation.

The effect of any particular interest rate payment on total Hive virtual supply (the figure which includes both Hive and "HBD if converted to Hive) inflation rate would of course depend on amount of HBD held in savings at any given time (and whatever interest rate was currently being paid). In the immediate term, this change would reduce virtual supply inflation, since the network currently pays 3% to all HBD currently, and afterwards it would only pay to staked HBD.

The proposed change itself isn't really related to whatever interest rate gets set, that's just some numbers I think were thrown out as potential values by witnesses in the discussion. I really don't have a firm opinion on what a good interest rate would be, but in any case it can be experimented with by the witnesses.

I don't think the idea behind increasing the interest rate is to convince Hive holders to move to HBD. As I understand it, the purpose would be to create an attractive investment vehicle for new non-Hive cryptocurrency investors hopping onto the DEFI staking frenzy.

I wasn't really clear what you mean about the 20% from active voting, so I can't comment on that yet.

As to the code change, I think it will just a be few lines of code. The lines of test code will likely be longer than the code changes themselves (in part because I doubt there were sufficient tests written in the past for interest payments).