As I understand it, Hector and Lyta had to be killed off hastily and in an afterthoughty fashion because the Vertigo office was kicking up a stink about the use of those characters. (Especially Lyta).
It was the the same kind of petty bullshit office politics that screwed up the Giffin/Bierbaum Legion. (The Superman office said they couldn't use Superboy or any of his elements, never mind that the Legion *is* historically a Superman Family element, so removing all traces of Superboy/man was nigh on impossible. Evidently the people in charge of the Super-office were as ignorant of comics history as they were petty..ha.)
The Vertigo Office has had foot stomping Viola Elizabeth Bott style tantrums every time any DCU writer has dared to use Lyta apparantly. It's complete nonsense, because Lyta was a DCU character long before Neil Gaiman used her in Sandman. (And you can argue that the Vertigo Lyta and the DCU one are two different characters from different Earths anyway.)
As one of the few people who could be described as a fan of this character, it really bugs me that she hardly ever gets used because of these stupid office politics.
It'll probably be something like 20 years or something ridiculous until we see her again. (until the current Vertigo office people are retired or gone or whatever)