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I think Spanky was the one who mentioned this before, but Lorne was best as a recurring character like S2, imo. I really do love Lorne, but he's the kind of character that we shouldn't get too much of, or it'll ruin the 'mystery' that makes him so great. Like learning his name. He was fine when he was just the Host, helping out Angel every now and then and running Caritas. Suddenly he's living in the Hyperion and at the gang's every beck and call and that just kinda ruined it.
I wish they hadn't ruined him further in S5 and instead let him go off; like, if he didn't say yes to the W&H deal and started a new Caritas, something to that effect.
Maybe not ninja skills, but I do think that could have had his use his talent more.
I do much prefer him in season two, when we do see him helping out with the gang because of his gift. In season three he moves and becomes the baby sitter, and more a background character even though he's there more.
Resisting the urge to be silly here (mainly involving potential shipping with him that would probably make a reader or two out there go up in spontaneous combustion) I think it would've been interesting if he and Fred made jokes and references with each other that only they could get from having spent so much time on Pylea.
Fred could also seek to understand the secret of Lorne's empathy (which seems a variant of the way others of the Deathwok hunt) as it would have a great many uses for good as well as evil. Of course Lorne would be creeped out by it all (and might tell her "I know we're on your world now, but that doesn't make me your cow or guinea pig") as he could be another Deathwok demon that shows up through her connections at Wolfram & Hart. Perhaps he has to convince Fred that she is walking down a dark road no matter how good her intentions are, especially if the Deathwok demon is there under duress.
Another possible storyline is a mind control spell that affects many (like when Amy cast that love spell for Xander or that jacket in s7, or maybe even some new version of "band candy") in which he's immune for one reason or the other, but though he can sense it in others, he can't get anyone to believe him, possibly putting himself in grave danger in trying to save the rest. While doing so he could openly wonder if he shouldn't just get out while he can as Angel and friends have just made his life so much more difficult (sure they saved him, but typically from trouble they got him into in the first place). Let's see some character growth.
Here's the problem. What was Andy Hallett's range? I can't find any evidence of school acting, the man was discovered as a singer. The man only played one role in his tragically short career, and there are only two or three scenes that I can remember that are anything other than "Demon Liberace." I suspect his ability as an actor was limited, and his under-utilization reflected this. So, I agree, the best roles for him were singing, and keeping him in his club. He loses a lot when he starts living in Angel's house.