Mr Light wrote:
To be fair, Ana-Lucia and Libby and Eko were supposed to around longer but they were prematurely written off for drunk driving / actor problems
If memory serves me well, Libby wasn't supposed to be killed off at the same time as Ana-Lucia who was always intended to be killed off near the end of season 2, but because most fans didn't like the Ana-Lucia, the writers knew that nobody would care when she was shot, so they added Libby to that scene as well to up the shock value.
Whatever loose plans they had for Libby's character were given to other characters down the road. And we never did find out much more about Libby and why she was in the asylum and why she was in dealings with Widmore and why she gave him her boat. Presumably he needed the boat and maybe The Others had a hand in killing Libby's husband?