Geo differential is only like +12% in Santa Clara vs. Oregon or Arizona. Intel definitely underpays here. Fresh grads are getting 200-300$k at google/Facebook/etc, Intel is just not competitive in some areas. Better situation in Oregon or Arizona though, where Intel pays relatively well.
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Really difficult to say, but more likely than not, you don't have much negotiating power, unless you are really in-demand. When someone is hired, HR comes up with a salary proposal based on what they think is appropriate according to the team's salary structure. In my personal experience, the manager then has very little leeway in changing that proposal.
What if I quit and move to lower cost index? Will offer be per the lower cost index? Or do I have any negotiating power? If I quite in Folsom then got rehired in Phoenix? I may have a consulting opportunity in the time I am thinking of leaving for a year or two.
Cost of living index has nothing to do with it. Increases when moving to a more expensive city are very small. Some of my colleagues were considering moving from Austin to thewest coast, and they would have received a 5% bump. No, I am not joking.
You would get more if you quit your job and get hired again locally. But obviously, that is not going to happen.
Cost-of-living index, look it up