Turn group chat into encrypted one?

Key-contact represents a primary key. If primary key changes, you get a new contact. If someone has two primary keys, they are represented as two key-contacts.

Key rotation usually means rotation of encryption subkey. This does not change primary key, so the contact will still be recognized as the same. There is currently no key rotation in Delta Chat, as in, it does not generate new encryption subkeys. There is more discussion of this in

As for replacing primary (identity) key, there is a draft draft-ietf-openpgp-replacementkey-04 - OpenPGP Key Replacement but otherwise I am not aware of anyone doing identity key replacement in OpenPGP or other messengers yet. Main reason for this OpenPGP draft is making a way to eventually migrate to OpenPGP v6 and post-quantum primary keys.