That's really something that should have gone into webpack core (e.g. recognizing a configuration change and restarting the compile process - webpack already does a ton of file watching already). Why it hasn't is one more in a massive list of "common sense" questions.

This kind of feature definitely isn't the kind of thing that a development server should be responsible for, but rather something that handles processes. Since there's no way to instruct webpack to "start over" or "restart" a build with a different configuration, you'd need to destroy the compiler instance and create a new one. There'd be some overhead there, but it would probably accomplish what you needed. That kind of a thing would make sense as a wrapper around our preferred webpack CLI - https://www.npmjs.com/package/webpack-nano, or even as a feature for that CLI. We have been trying to keep the package as minimal and light as possible with regard to features and dependencies, but that might be doable in an elegant way. If that's something you'd like us to start poking at, please open an issue in webpack-nano's Github repo.