I'd never heard this before I came to this message board, but apparently there was some kind of behind-the-scenes thing where Gates McFadden was being sexually harassed by a producer during season 1, a producer who left after season 2 at which point McFadden came back.
Since learning that, I'm surprised McFadden would've wanted to come back since apparently no one on the show helped her when she was being sexually harassed, if this rumor is true.
Don't know about Muldaur and the rest of the cast. I like Pulaski as a character, less bland than Dr. Crusher, but then it would've been awkward with Wesley there but no mom, and the Picard-Beverly background drama would've been gone from the show.
There's a YouTube video interview with Rick Berman where he goes into this a bit explaining that Gates and producer Maurice Hurley didn't "get along" as well as the feeling that the character wasn't working...
Berman was the one that wanted to keep Gates and once he could make it happen for Season 3 he got her back. I'm sure they had to pay up though...