Emission and absorption of a photon aren't instantaneous processes as long as you don't perturb the system by measuring its state. If you do, the system collapses in a non-reversible way. Let me explain how it evolves in the case you don't measure:
Spontaneous emission
An atom in the excited state $| a \rangle$ emits light in the same spatial pattern as a classical dipole antenna:
As you correctly state in your question the emission starts out from the position of the atom and moves away from it at the speed of light. Similar to an antenna which is not damped by electrical resistance, but only by the energy it loses due to radiation, the power it emits decays over time. For the case of the atom the state $| a, 0 \rangle$ in which the atom is in the excited state and there is no photon present evolves towards the state in which the atom is in the ground state $| b \rangle$ and there is a photon in a superposition of many modes with different wavevectors $\vec{k}$. This happens smoothly:
$$
| \psi (t) \rangle = c_a (t) \, | a, 0 \rangle + \sum_{\vec{k}} c_{b, \vec{k}} (t) \, | b, 1_{\vec{k}} \rangle
$$
The temporal evolution is exponential, i.e. $\left| c_a (t) \right|^2 = e^{- \Gamma t}$, so that after infinite time the atom is completely in the ground state and the photon is completely emitted. For a more rigorous description see the Wigner-Weisskopf theory as described for example in Scully & Zubairy – Quantum Optics (1997) chapter 6.3.
Time-reversed spontaneous emission
All of the described evolution happens unitarily, hence it can happen backwards as well as forwards. If you have an atom in the ground state and prepare a photon in a spatial mode matching the emission pattern of the atom having the right temporal profile you can deterministically drive the atom into the excited state. This is described in Stobińska et al. EPL 86 (2009). It is of course very difficult to do, because you need to focus the light from the full $4 \pi$ solid angle onto the atom and find a way to shape the photon to an exponentially rising wavepacket.
Absorption of a spread-out photon
Coming back to the apparent paradox of your question: If the wavefunction of a photon is extended over a large area how does it excite the atom as if it was localized there? The answer is "It doesn't.". Like in the case of spontaneous emission the state of the overall system evolves in a superposition of the atom being in the ground state / the photon flying around and the atom being excited by the photon. Just that in the case of a photon not matching the spatio-temporal radiation pattern of the atom the probability of the atom being excited $\left| c_a (t) \right|^2$ is very low. So the majority of the wavefunction still describes a free-flying photon.
Only when you measure the state of the atom (or the presence of the photon) you force the system to be in either of the states. This is the moment when the whole spread-out photon collapses to be either absorbed or detected somewhere on a camera. The whole mystery is in the description of collapse due to measurement. But this is another topic, covered in questions like "Practically, how does an 'observer' collapse a wave function?".
Is the absorption also a measurement?
There is a connection between the (partial) absorption of the photon and a projective measurement. By their interaction the atom and the photon become entangled, just like in more advanced collapse models the detector becomes entangled with the observed system. As an example consider an animal-friendly version of Schrödinger's cat: A radioactive atom, which can trigger a detector and an experimentalist monitoring the detector. If the atom was alone it would evolve into a superposition of decayed and not decayed
$$
| \psi_{\text{atom}} \rangle = \alpha | \text{decayed} \rangle + \beta | \text{not decayed} \rangle \text{.}
$$
If you include the detector into the Hilbert space you can model the system of detector plus atom as an entangled state
$$
| \psi_{\text{atom + detector}} \rangle = \alpha | \text{decayed} \rangle | \text{triggered} \rangle + \beta | \text{not decayed} \rangle | \text{not triggered} \rangle \text{.}
$$
Involving the experimentalist as well then yields the state
$$
\begin{align}
|\psi_{\text{atom + detector + experimentalist}} \rangle = \quad &\alpha | \text{decayed} \rangle | \text{triggered} \rangle | \text{decay observed} \rangle \\
+ &\beta | \text{not decayed} \rangle | \text{not triggered} \rangle | \text{no decay observed} \rangle \text{.}
\end{align}
$$
Because the experimentalist is part of the superposition, in each branch of the wavefunction it appears to the experimentalist as if the atom is now in a definite state – as if it had collapsed from the initial superposition.
So in the end the distinction between the atom and a macroscopic detector is artificial. But it's justified, because the atom can be coherently manipulated to unentangle it from the photon. For macroscopic systems like the detector (and experimentalist) this is pretty hopeless because they have too many degrees of freedom.
Absorption of a focused photon
In the case of the elliptic cavity the emission of atom $A$ is indeed reshaped to match the spatial emission pattern of atom $B$. Despite this the probability that atom $B$ absorbs the photon is still less than $1$, because the temporal profile of the emitted photon is exponentially decaying, while perfect absorption (time-reversed spontaneous emission) requires an exponentially rising profile.
If the cavity size is reduced such that the emission of the photon takes significatly longer than a round-trip of in the cavity, the excitation being initially in atom $A$ can be fully transfered to atom $B$ and vice versa.
The following is a simulation starting in the state
$$
| a_A \rangle | b_B \rangle | 0 \rangle \text{,}
$$
i.e. atom $A$ in the excited state, $B$ in the ground state and $0$ photons in the cavity. The state evolves according to the Hamiltonian
$$
\hat{H} = \hbar g \left( \hat{a} \left( \hat{\sigma}^+_A + \hat{\sigma}^+_B \right) + \hat{a}^\dagger \left( \hat{\sigma}^-_A + \hat{\sigma}^-_B \right) \right)
$$
(sourcecode here).
As long as no projective measurement is performed the excitation is symmetrically exchanged back and forth between the two atoms.