What is the difference between "App fabric workflow service" and "Workflow manager 1.0"
Both used to host workflows. For me workflow manager looks good because it is scalable, we can create workflow hosting farm using multiple servers.
will "Workflow manager" replace "appfabric workflow"? for new project what to select?
This is a tough one.
AppFabric Workflow Services (actually WCF workflow services) are hosted in WorkflowServiceHost, but to be honest, we can see that AppFabric workflow hosting is not really evolving much. Especially in combination with BizTalk tools (adapter & mapper) through BizTalk AppFabric connect, it is nice to build some things.
Workflow Manager is the technology that was shipped with SharePoint Server 2013, together with Service Bus for Windows Server. To be honest, it is a V1, but this will probably be the technology that will be evolved (especially since SharePoint is the biggest customer of this technology ;))
The nice thing about Workflow Manager is that it is built to be cloud-ready (isolation, scalability, security...). You also have the concept of the Trusted Surface (http://msdn.microsoft.com/en-us/library/windowsazure/jj193509(v=azure.10).aspx) This allows you to sandbox customization.
So, my bet would be: if your product/platform is a long term thing, go for Workflow Manager, but live with the V1 concepts, or ignore the Trusted Surface sandboxing. If you build it for shorter term, go for AppFabric still.
Hope this helps