Libby is dead because the actor who plays Libby has landed a role on another series.
I don't think you can have either of them survive the shooting. If they did, they could immediately finger Michael as the shooter (the only way out of that is to keep them in a coma or something like that, but given the lack of medical supplies, not likely to stay alive in a coma).
I agree that Michael was likely told, "Free Henry and you can have your boy back." Michael is a desperate man.
The episode was chock full of other stuff as well. The conversation between Locke and Henry was interesting. "You are one of the good ones." and, "I was on my way to get you."
This combined with Henry's conversation with Analucia, that "he" thought she could be brought around, that she could change, despite what some thought, suggests that what we were thinking about the survivors were being tested is somehow true. They were chosen specifically to be there because of what they had done. That they could be fixed or cured.
I tells ya, if this turns out to be some sort of re-education experiment where "bad people" with redeeming values are put into some sort of Matrix-like machine to make them better... I am going to be really pissed.
I am pretty sure we are going to see both Libby and Analucia back in future episodes, but only in flashbacks.
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"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke
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