Most likely the ATM software will have to be updated to work with the newer MS OS - probably the most cost effective, since the hardware and software are both designed for a MS OS. Otherwise, you'll need a complete software rewrite, even if most of the processing takes place in the cloud.
If a rewrite is what's decided, they should go with some flavor of Linux for the OS - even if proprietary management software needs to be written as well. In the long run, it will save big bucks - from not having to fork over funds to MS and in interfacing with ATM hardware.
In banking as in government, accreditation has become a huge issue.
Maybe. I haven't seen any pricing for W10 IoT yet, but I wouldn't be surprised if they give it away. Interfacing with the hardware is a matter of writing device drivers. I installed a couple of Sendmail servers for a project at work and fought trying to get the copy of SUSE we got from the IBM rep to work with the Dell RAID controller. When my manager asked for an update, I told him "The curly-tailed bitch is giving me grief!". We gave IBM their SUSE back, and ordered a copy of RedHat.