Flat pedals are fine. There are various figures floating around .... most in 5-6% range---for the greater efficiency of clips, but those are done with experienced riders with very developed pedal motions. Most casual riders will probably not see any benefit. (I commuted on flats for well over a decade, and the big issue is that in heavy traffic they are safer, IMO. I went to clips and found that I couldn't get off the bike as quickly when things (meaning "stupid drivers") went wrong )

Drop bars can be set up so the hood are where the flat-bar grips were, the flats will set you up higher, and the drops a little lower.

For sizing, this calculator is Sometimes useful. It works for me, but no guarantees. (https://www.competitivecyclist.com/S...ulatorBike.jsp) A 56-cm bike (of course, every manufacturer measures differently, and every bike differs) is generally recommended for 5'-10"----6-foot or so. At 5'-7" I'd say it might be too big.

You definitely want to do a couple test rides.

As a larger-than-he-wants-to-be rider myself .... the only time biking really cut my weight was when I either did 30-50 miles per day of hard riding (way too out-of-shape for that stuff now) or when I did an hard hour in a spin class before an hour ride. Diet is what determines body fat, not exercise. I can go to a gym and really push on the eliptical and burn (what they claim) is 1,000 calories in an hour. I can eat 1,000 calories in a 15 minutes and want more. Most rides I probably burn way less than half that, because I don't push hard. What I eat and when I eat pretty much determines how far overweight I am at any given time. Exercise helps, but three slices of pizza can wipe out the weight-loss effects of any ride.

Still, the way you ride, daily most of the year ... that's awesome. Having done it for many years (back in the glorious days of early middle age) I know itchanges your mind as well as your body, in positive ways. I envy you a little. Except on the third day in a row of cold rain .....