A) Repeat after me. There is no front running in these scenarios. Front running happens between a client and his intermediary that has a fiduciary duty to him. Other market participants do not have that duty.
B) Yes, market making HFT are routinely fighting against other HFT that are designed to predict their behavior and make money from them.
The case for allowing it is simple. How do you disallow it without having even worse outcomes. There is quite a bit of evidence that suggests that for the average market participant HFT market makers are a positive not a negative.
