Why does Feistel encryption algorithm encode half block every time? What would happen if the entire block is encrypted in each step?
You can't. Some of the block is used as the input to the F function, and the rest is modified. Those can't overlap. If you wanted to modify all of the block, there wouldn't be any input to the F function.
You might be interested in https://en.wikipedia.org/wiki/Feistel_cipher#Unbalanced_Feistel_cipher