This is my interpretation, as well. The spell Papalymo used was the same one Louisoix used, and that was meant to kill him, as well. (Bahamut "interrupted the cast".) I think there's a bit of necessary narrative symmetry in keeping Papalymo dead, too. In retconning Yda into Lyse for the sake of Stormblood, Yda the Archon was effectively killed. (And literally killed.) In fulfilling her new destiny, Lyse became something other than substitute for the fact that Yda and Papalymo were a single cohesive unit; one pair.
Now they're a pair again.
The only part that feels odd about it to me is that we spent several years associating the Scions with the cities Louisoix had them integrate into. Logically, I know Thancred isn't from Ul'dah, didn't spend that long in Ul'dah, isn't inherently part of that sphere, and we're directly affiliated with the government now, anyway ... but they're still associated. I figured, for that reason, Thancred, Y'shtola, Papalymo, and Yda had plot armor. What if the game wanted to utilize that connection or balance again? What if one day we went back to Eorzea and explored more of the continent and focused on "home" again?
Who will be our obvious company in Gridanian areas now? The obvious answer is we don't need anyone, but there's something very lonely about that.
Lyse was also masquerading as Yda for the non-Echo parts of 1.0. Con: the stitching on the changes is a little obvious. I swear I can even detect changes in her characterization in 2.4, around the time they'd be moving into full Heavensward development and planning the very basics of what 4.0 would be. Pro: that means Lyse immediately got some street cred for being badass in her own right by being the only one of the Scions to actually land a blow on Gaius in Mor Dhona. (Or at least graze him.)Papalymo
Where are we? Near Gridania, you think?
Yda
Take a look around. It’s obvious, isn't it?
The quiet, the calm, the beautiful flowers.
There’s only one place it could be!
The great beyond! I do believe we’re dead, Papalymo.
Papalymo
Oh, Rhalgr take you and your great beyond!
Yda
See? Look, here’s a psychopomp come to guide us along.
Nana, is that you?