Personally, I think to say that Sarah has some form of precognition really solves the entire thing rather well. I mean, I really can't accept that she didn't know what was going to happen as a result of her intervention in 1967, because otherwise, she wouldn't have done it. Of course she hoped that her intervening would save some lives, but I think ultimately she knew it would lead to more than that. She knew that it would lead Barnabas down the correct path he needed to go down, and ultimately lead him to be a better person. Depending on how you define precognition, it could swing one way or the other. If you define it loosely, by which I mean she knew she would've been saving some lives, then YES, she DID have precognition. If you define it as knowing that an event is definitely going to happen, no matter what you do, then NO, she probably DIDN'T have precognition.
I'm still unsure, myself, of whether or not Sarah knew that Barnabas would be doing all that time-traveling and reaking all the havoc he did in certain time periods.
And as far as her appearing in 1897, sure she could've watched unseen, making sure that Barnabas didn't do anything too horrible. I think it would've been a nice touch for the writers to add in the sound of her flute playing just after Barnabas had killed Carl, or committed some other such wrong doing in 1897. That would've been something simple enough to call back the memory of Sarah for most viewers and say "Hey, I'm still here, and I"m still watching, so be good or it's coal in your stocking."
Not to mention that with the writers preoccupation of reincarnation through the series, they could've had Sharon Smith come back and play a teenage girl who came to live at Collinwood, or maybe someone who befriends Jamison, or maybe even as Kitty Soams' daughter or niece or cousin, and then instead of having Kitty be the reincarnation of Josette, they could've had Sharon's new character be the reincarnation of Sarah. I think that would've been even more gripping if the Leviathans had've taken Sarah's reincarnated self hostage instead of Josette, because Josette was constantly in danger, whereas Sarah was only in danger once in 1795.