Good points, though I think I'll try to disagree just for the sake of it. You seem to want a little dissent, anyway.
Although the Empire would surely have wanted to create a new Death Star, it's perfectly possible that they simply wouldn't have had the time or funding to do so between The Empire Strikes Back and our hypothetical alternate finale.
Although I hate to bring the prequels into it, the Death Star's construction is shown as beginning nineteen years before its completion in Star Wars. Even if the construction process could be accelerated after having been built for the first time, the second Death Star is significantly larger than the original, and yet took only five years (perhaps less) to be built. You could argue that the second Death Star was already in construction by the time of Star Wars, but given the reverence that the Imperials apparently have for the first Death Star, it seems to be something utterly unique, not simply the first on an assembly line. Does it make sense that a new, larger Death Star emerged so quickly?
The Death Star is also spoken of as being as much a psychological weapon as an offensive weapon. However, as powerful and terrifying as the idea of the Death Star might be, its destruction at the hands of a blond pretty boy employed by a gaggle of "insignificant" Rebels would very powerfully disqualify it as a terrifying propaganda symbol. It would have been transformed into an image of humiliation and defeat for the Empire, not of victory or domination. The Death Star would be a reminder of the vulnerability of the Empire, and therefore not an area that a skilled propagandist would want to retread. That may be why the Death Star II is bigger, but that shows a pathetic lack of imagination on the part of the Empire. "So, the Death Star is now no longer as scary as it once seemed...I know! We'll make the next one even bigger!"
And, true to form, the invulnerable, world destroying super-weapon is once again pulverized by an utterly outmatched team of fish people, prune faced weirdos and an oddly masculine sounding woman.
Bad move, Empire.
The most compelling argument against the Death Star II for me, though, is just how dramatic the apparent alternative might have been. Several pieces of Ralph McQuarrie's concept art for the Imperial home world are available around the net, and I think it would have made for a much more exciting and original finale than the second Death Star. The Rebels, who until this point have been dodging the Empire on the frontiers of the galaxy - Yavin, Hoth, the distant outer reaches of the galaxy etc. - would be forced to enter the belly of the beast, to face the architectural embodiment of everything they've been fighting against. To actually see the seat of Imperial government, which has only been spoken of until this point, seems the logical conclusion of a series whose central conflict is against the Imperials. The dark, oppressive skyscrapers would have brought home to us further the wicked and intolerable nature of the Empire, particularly if we get to see our heroes lost among and dwarfed by them. In the words of Henry Jones Senior, "We're pilgrims in an unholy land". It is also quite exciting to imagine Vader and Luke dueling on the parapets of the Emperor's vast palace, rather than in the confines of the second Death Star. Imagine powerful winds rising up and blowing Vader's cloak dramatically as his son faces him, or a sudden gust howling and unsettling Luke's hair as he decides whether or not to spare his defeated father, all with the Imperial city glowing at a distance. It would have been original and, I think, more interesting than the retread of the Death Star.
And just to really labor my argument, I'm going to remind everyone that Gary Kurtz agrees with me! Ya' don't hate Gary Kurtz, do ya'?
Gary Kurtz: One of the problems at that particular moment was it looked to me like Jedi was going to be disappointing – with the change in the story, with all of the story material that I had really resonated with being tossed out, and that whole Ewoks thing, and the new Death Star and the same kind of climax of Star Wars. It was, from a creative challenge point of view, kind of a rehash.
