I like Lorne (except for the pet names he has for everybody) and I think it was better for him to stick around. Caritas and the ability to see a character's future from his singing turned out to be a useful talent. He also was a great singer - he could have done well in "Once More with Feeling". When the story slowed down, you always got the impression that everyone else was operating at their normal speed whereas he always made things move faster. His statement in Season 5 that he had his sleep removed is totally consistent with what we know about him.
Lorne was a unique character. I don't think there are many actors out there that could have pulled off what Andy Hallett did in the role.
Lorne in season two is slightly different to the later seasons. In season two, he started out with a little more mystery to him. In the later seasons he was used to lighten the tone and more for humour, but he never cheapened the intensity of the show or made it seem child-oriented or cheesy.
I like him best I think in seasons three and four when he moved into the Hyperion. His shining moment for me is when he goes with the gang to battle the big bad Beast. "I think I'm gonna need a bigger arrow..."
I'm sorry, are you suggesting they were planning to kill The Vile Excrement during the writing process, only to change dead to mostly dead? My answer would be, I don't think they would have cut off his head unless they meant to, it was intended to be like a severed limb or a severed thumb to a human, a painful experience, a permanent scar, but not an execution proper, the Yazuka only wishes to punish and reprove failure. If you look at the Romans, a warrior society like the Deathwok Clan, beheading was considered an honorable death, when they hated you, they had various means of making your death an entertaining one, not to mention sacrifice. If your question is, was Lorne a valuable member in season 3 & 4, yes, I believe his continued existence outweighed any value his death might have had, like establishing the brutality of a demon world.