What will feed quality be like? I think you will find out when you feed it. When we have droughts, alfalfa yield tends to be low, and quality tends to be high. But I think you will be able to answer that in due time.

As for killing the stand.... no, I doubt that very much. The fact that the alfalfa is knee-high now tells me that it is not stressed out completely yet. I have see drought-stressed alfalfa no taller than 12" - many plants were less - and it flowers. Under severe drought conditions, alfalfa will tend to go dormant. When it gets water again, it will green up.
Another interesting observation: I have seen that - in drought conditions - newer stands tend to go dormant before older stands. My reasoning on this is that older stands typically have deeper roots, which enable them to get the soil moisture that is deeper in the soil. Newer stands, with their less developed root system, can't get that deeper moisture so they shut down sooner. Don't worry about losing stands. Just be patient .... and keep praying for rain!