Bryan- please don't apologize for starting a new topic. It's an old show, the only novel thing going for it is revisiting topics here!
The combo of playing musical time slots, David Lynch and others wanting to explore other creative ground, and a general waning of public interest when these things started happening after Season 1 led to the death of the show.
Whatever point Peaks stopped being David's primary focus what, I believe (so do many cast members), was the downfall, was more the end than revealing the killer. I doubt revealing the killer was the beginning and end of David's frustration with working under network restrictions, although it must have played a part... the network said the killer had to be revealed. There was no way around it. We like to think 'what if' but, in the words of Donna Hayward, "Maybe the sun won't come up tomorrow if you wash your hair. Keep thinking like that and you'll go crazy." It was not a logical possiiblility, what with vested interests and the necessities of creating a satisfying narrative structure.
Besides- The killer was known from the get-go, and the clues were there even in the pilot, and in the Diary (Jen dropped deliberate clues, as she said on Good Morning America, after David and Mark told her whodunit) If you look at it that way, the killer was being revealed, inevitably, at a steady pace. Without Leland's extreme behavior in place, TP would not be the show it is!
The show, as a high-quality prime time serial, just did not have longevity. It was expensive, the writing started slipping... It set the bar too high in the beginning, I think, and bridged too many TV genres. Daytime serials set the bar low. Prime time crime dramas and supernatural stories were self-contained and didn't require close, loyal viewership. (Regrettably, these formulas allows for series that go on and on and on....) TP was the most amazing, engaging thing people had seen on TV, and demanded they keep tuning in.
The hottest fires burn out fastest.