If I reset "all settings" will I lose my contacts and photos?

Erase all content and settings means exactly that. Contacts and photos are content. You will be left with an iPhone that has nothing on it, like the day it was purchased.

Perhaps it's too late, but "Reset All Settings" will not erase your photos and contacts.

"Erase All Content and Settings" will.

http://help.apple.com/iphone/9/#/iph7a2a9399b

More than likely it is referring to your iCloud password to remove Find My iPhone. If you are dealing with forgetting your passcode, you can use the instructions in this support document that refer to your circumstances. If you forgot the passcode for your iPhone, iPad, or iPod touch, or your device is disabled - Apple Support

To address the first statement in your post, the iPhone cannot reset your password. You have to remember your 4-digit passcode as well if you are using Touch ID, in case the Touch ID stops working. Any time you restart or reset your iPhone, when it restarts, you will need to use your 4-digit passcode to access the device before you can use just Touch ID.

What did you do before you say it changed to 6-digits? Did you update your device to iOS 9.x? If so, then it asked you for a 6-digit passcode. If you did not enter one, and changed it the standard 4-digit, then is still 4-digit. If you are just activating it after an update and it asking for 6, then it is asking you to create it. You can opt to create a 4-digit if you want, or continue using your old 4-digit.

If you forgot the passcode for your iPhone, iPad, or iPod touch, or your device is disabled - Apple Support