They couldn't very well keep Kes because she'd have to start getting old. I think Seven is a better character than Kes anyway. I can think of more Seven of Nine episodes I really liked than Kes episodes.
I like Seven for her sarcasm (that's my story and I'm sticking to it). Kes wasn't as sarcastic.
But we already had two sarcastic characters in Tom and The Doctor. Tuvok could be good at sarcasm too so we didn't need another one.
As for Kes's lifespan, it could have been prolonged so she didn't have to get old.