At some point the writers decided that Buffy needs to be turned into a 30something chick with a kid without actually becoming a 30something or having a kid. It's pretty ridiculous. Anyway, Hank as we see him in pre-Dawn seasons just does not mesh with that vision. Scoobies still feel like they need to lie to him about Buffy's death to keep Dawn in Sunnydale though so there's that.
Man, it's like every BtVS character has daddy or mommy issues. I hate it so much.
I think the neglect of using Hank was entirely intentional.
I read somewhere that initially the thought was to never even see Joyce on camera? Simple reason - because the parents were never more than tangental at best in relation to the story.
Is it a bit unbelievable that Buffy's dad seems to more or less disappear from her life? Maybe, but it does happen. Also the show does not lack from it. Hank is ultimately not a necessary character. It might have been easier if they had never bothered with him at all (those few glimpses we get of him early on) because it would have made it less obvious that he so suddenly disappeared and they wouldn't have had to explain his abscence from Joyce's funeral and Dawn in the aftermath of that... that's really only where his lack of use is noticed and then I do think it was omitted by the writers because bringing him back into the show would have been cumbersome to the story in general where his role as the father figure had been replaced by Giles.