Lets be very clear here, aircraft performance is determined by three things; weight, altitude and temperature (WAT). An increase in any one of these three things reduces aircraft performance. Drag is only considered in performance charts in respect to flap settings and other drag devices.
If you have ever calculated the takeoff and climb performance of an aircraft departing from a high elevation airport on a hot day at maximum takeoff weight you will clearly understand this.
The test question you posted is somewhat poorly written as it makes some assumptions. It doesn't mention pressure changing as you fly into the warmer air and so you have to 'assume' that the outside 'static' pressure is constant (despite the fact that, flying into warmer air would typically result in an area of lower pressure).
Re: the airspeed. Lets say you are flying along indicating 100Kts and this was also your true airspeed (this would only be the case at sea level on a standard day). As you fly into the warmer air it would become less dense. The dynamic pressure (ram air measured by the pitot tube) will reduce. Therefore the airspeed needle will drop and show a lower speed.
Let's say it drops to indicate 98 Kts... but because the power remained constant you are still doing 100 (which is your true airspeed). The question ignores the fact that engine performance decreases with higher temps., but they said 'power constant'... it's a theoretical scenario.
Re: the altimeter. Because the warm air is less dense, the static air pressure around the aircraft will decrease. The altimeter simply shows the difference between static pressure and a fixed pressure in the bellows (which can be adjusted by the setting in the Kollsman window). Because the static pressure is now lower the altimeter will indicate higher than your true altitude. You would compensate by setting the correct local altimeter setting.
Flying into the warmer air did not increase your performance! In our example above you were doing 100Kts TAS in the cooler air and you are still doing 100Kts TAS in the warmer air, it's just that the airspeed is indicating differently.
In fact, to hold the power constant in the warmer air you would need to increase fuel flow to the engine, which is actually reducing your overall aircraft performance!
Airspeed indicators show 'indicated' airspeed because this is critical for aircraft maneuvering (like rotation, approach, stall etc.).
Some altimeters have TAS dials around the edge, you set the temp. and P. Alt. in cruise they have a sub scale that will show your true airspeed. Advanced flight decks (glass) have electronic TAS displays.