1. Depends on the liner. If the liner will take the heat and has chemical resistance to ATF, sure, you "can" use it. I tend to prefer steel-braid-over-Teflon (Aeroquip 2807) rather than steel-braid-over-rubber.
2. You've hit one of my pet peeves. The stuff is not "line". A "line" is an imaginary object. What you're talking about is HOSE.
-4 is TOO SMALL. Most vehicles come with 5/16 trans cooler tubing; so -5 would be OK--but not a popular hose size. -6 is adequate.
The question you're asking is the wrong one. It's not a matter of whether you "can" use hose, you need to be asking if you SHOULD use hose.
The answer to that is "NO". Hose is heavier, less durable, more expensive, less durable, butt-ugly, and less durable than OEM-style double-wall seamless steel tubing. ATF is SURPRISINGLY flammable, if the hose leaks and sprays the exhaust...better have a bigass fire extinguisher handy.
By the way, the steel braid will act like a dull hack-saw on anything the hose vibrates against. It'll wear both the hose and the object it's rubbing against. If you use it, make ABSOLUTELY sure it's secured properly.