You're right here, at least about the catsuit. I guess that had something to do with a certain producer's obsession with catsuits, as we could see with Troi, Seven and T'Pol.The reason why you can tell they replaced Kes was because they wanted to add a sex symbol is they tried to do that with Kes so you know it was already on their mind in season 3. They gave her a catsuit and the long flowing hair.
I do think their is some truth in them wanting more conflict and wanting to use the Borg but a sex symbol was clearly the number 1 thing they wanted.
Jason
When it comes to Kes's longer hair, that's a different story. It was obviously a result of Lien becoming allergic to the stuff which was used to attach the Ocampa ears on her head. By letting her have long hair they could simply omit the Ocampa ears.
However, the "sexing up the character" might have had something to do with it as well which was actually ridiculous because Kes was never meant to be a sex symbol.
Not to mention that they obviously did find some other stuff to attach the ears without allergic problems because she was wearing them in "Wors Case Scenario" and most of all in that horrible crap episode in season 6.
As for the other reasons for bringing in Seven, they already had what they were looking for. Seven was basically a cross between Kes (relationship to Janeway and The Doctor), Torres (certain controversy) and The Doctor (search for humanity) so what was the point? They already had the Borg as main enemy as well from the end of season 3. So what was the point, other than fulfilling one producer's wet dreams?