thickness of cedar siding
Depends on the finish you select. A high-quality product won't be so dependent on a high-quality primer. The issue is mostly sealing, as the thin factory-applied primer bonds well, and facilitates a good bond with your topcoat, but doesn't necessarily seal well itself. Typically you'd plan on a re-coat after only a few years anyway to establish a hearty, protective finish.
I've never seen rabbeted siding buckle vertically, and I'm in a part of the world with extremes of temperature and humidity. Typically only thicker, more stable siding is rabbeted, and it's done so that the profile isn't so deep. There's really no drawback to it, in my opinion.
Cedar siding is prone to cracking along the grain if it's too thin. I'd be more concerned with the thickness at the top of the boards than the bottom. Ideally, you have a full 3/8" at the top. Some cheaper siding is barely 1/4", and you can feel the difference. If the boards are easy to flex across the vertical with your fingers, look for a better product. 
Grade A (which I assume means "clear" in this case) will obviously be less prone to structural breakdown due to greater consistency. However, knotty cedar isn't necessarily a durability risk. Take a close look at the structure of the knotty boards and check for looseness and obvious weakness. When installing, cut out knots that look like they'll fall out--ones with sharp edge lines and which penetrate at a 90 degree angle.