If Buffy would have ended with "The Gift", I would've been very disappointed. I loved seasons 6 and 7, loved all the character development in them, and I think BtVs was consistently great throughout (well, season 1 was weaker, but it was still pretty good, although the show really became great in season 2).
Besides, I don't think "The Gift" would have been a good ending at all. As they said in S5, "The hardest thing in this world is to live in it". Buffy in season 5 had just lost her mother and was forced to start living as an adult, without a parent figure, taking care of a sister, etc. If BtVS had ended with season 5, we would have been denied seeing Buffy and the other Scoobies out of their comfort zones, having to really deal with adulthood and real world on their own - trying to live in the world, and making mistakes, and failing, and facing their own demons, and trying again.
Yeah, but that's the whole point of her episodes in Angel Season 4. She knows she'll never be able to make up for what she did (just as Angel can never make up for what Angelus did). Maybe she should be in jail, maybe not. However, if she can be useful in the fight against evil, I'd rather see her doing that. Think of it as community service.
Agree. The whole point of the penitentiary system is to 1) protect the society from any further crimes that criminals could commit, 2) dissuade others from committing crimes, and 3) try to rehabilitate the criminals into acceptable members of the society. I don't think that anyone is "irredeemable" if they are able to understand the wrongness of their crimes, feel genuine remorse, and change in a positive way. The only ones who are irredeemable are those who are incapable of that.
The idea that some people 'deserve' to die or suffer forever because of the gravity of their crimes- whether or not they show remorse or ability to reform - strikes me as something that has a lot more to do with retribution and revenge rather than justice. It's an understandable human feeling, there are some evil acts that makes us so angry that we feel "this bastard needs to pay!", but the "eye for an eye" is really always pointless. Maybe we can get some sadistic pleasure out of the knowledge that a murderer is suffering, but what good does it do to anyone? It sure won't bring the dead people back or undo what has been done.
And if the choice is between a person (superpowered or not, it doesn't matter) atoning for their crimes by 1) being completely useless and suffering just because it's deemed that this is what they deserve, or 2) doing something good, I think the latter is the obvious choice. Even on the purely pragmatic level. There is no better way to atone for past evil than to stop doing evil and start
doing good. How much does one need to do to make up for past crimes? How do you measure that? Does it even matter? The key is to make the choice to do good.
The Potentials themselves were noticing her hypocrisy and were amused when she was trying to give them a black and white Watcher's Council view about vampires and demons vs humans, and her own behavior kept contradicting that the very next moment - with the way she was acted around Spike while giving speeches about how vampires are all the same and they're the enemy, or when she took the Potentials to the demon bar and talked about demons being all evil and dangerous, and then the next second she was hugging her buddy Clem. 
