This was the part of TFA which was unclear to me;

  This latest lawsuit claims that Uber implemented
  the so-called "upfront" pricing scheme in September
  and informed drivers that fares are calculated on a
  per-mile and per-minute charge for the estimated
  distance and time of a ride.

So reading that again I think you're right that's just talking about fares passengers pay, not fares paid to the driver.

Another key question -- what if Uber underestimates due to changing traffic conditions? Does the driver get underpaid? I doubt it.

So of course the estimate is going to be conservative. So what's the contract say? Probably pretty clearly drivers are paid on actual miles and minutes and not Uber's estimate. I mean, if drivers were paid on the estimate, Uber would still probably be getting sued because it is sometimes low.