Considering how many delays the F-35 program has had, what you said about the KFX is just wishful thinking at this point. It's not easy designing and building a fighter aircraft, let alone a 5th gen one, without major US assistance.
And yes, we do have to replace the Hawks as they are sorely outdated at this point. Like it or not, the government (with good reason) sees more sense in procuring more F-16's then waiting 15-20 years for a fighter that may or may not end up in our inventory. Regardless of what people say about salespeople or saying that I'm a salesman, my professional background is in defense. And it is my (and a lot of other defense professional's opinion) that to wait 15+ years for something that is sorely needed now (because newsflash, our neighbor to the north is not going to wait) all for the sake of national prestige is asinine.
Moral principles also have no place in defense. I don't know if you realize but these things happen all the time, and no one genuinely cares. Look at Canada, they were part of the F-35 program (and a higher tier partner than Singapore and Israel) but do you see them being operated by the RCAF? At the end of the day we're talking about weapons, there's no morality in it. And to say that it would affect private South Korean investment is laughable, why would private investors care about a defense deal between 2 governments? It would hardly affect their profits at the end of the day.
What you're going to see is articles like this,
https://www.indomiliter.com/indones...ngsuran-proyek-jet-tempur-kfx-ifx/#more-74238, things such as the government blaming other factors into their inability to pay for the KFX costs. The government is not going to openly admit their pulling out, much like how they're not going to admit that they're cancelling the Su 35 procurement. It's all face. They're going to keep dragging their knuckles until they either find an acceptable cover for pulling out, or it drags on long enough that the other party complains and cancels the deal. Welcome to Realpolitik.