VP HF Lateral to PE

Currently a VP at a hedge fund and am interviewing for a niche long only trading position (Insurance money for the time being) at a large private equity group. 2 months of interviews (3 rounds) going great, recruiter (headhunter) that reached out said I was the only one he could find that fits the description (given specialty in illiquid product types). Suddenly hit a 2 week period of silence at about the 2 month mark, check in to see what's going on. Recruiter says they need to start an interview with an internal referral and need to put me on ice in the mean time. 

Some more background:

• The position i'm interviewing for is for a SrAssociate/VP role, maybe they go cheaper and go with associate? I can't imagine the interviews going any better than they have
• They are making a total of two hires: another hire for a slightly different product type at the associate level. Recruiter indicated that they want to hire an associate AND a vp and not two associates
• I'm currently 1 interview from the final round - recruiter told me that they may interview the internal referral to the final stage first but would keep me posted. 
• They want to have a hire by the summer so has not been a huge rush
• Recruiter told me hiring manager annoyed that they have to interview another candidate (my interviews have gone really well)

Questions:

• Do large PE groups prefer referrals over external hires or do they only focus on their level of expertise?
• Realize lateral moves take forever but at the VP level, what's the usual waiting time between interviews?
• Would a recruiter tell me my chances are better than they actually are (given he told me the points on how they want to hire a VP and an associate, how I've gotten great feedback)?
• Am I fucked?

My current job security is fine and only looking to move for the right seat. I'm still applying to other places but the waiting is killing me.