Completely agree, I'm not a fan of letting this particular murderer get away with it, it's the only episode where it happens, like you said; and I'd have understood more letting Lauren Staton go in that episode, probably called "it's all in the game", where Nick Franco was cheating on Lauren's daughter Lisa and who threatened her, as in if there's a murderer who could've been let go it was in this episode, not certainly in Forgotten lady.
I never even thought of it that way. I'm pretty sure that's how they wanted her character to be. I think her sickness had something to do with how she acted, all she could remember was how great she used to be... I guess...