was this due to fear that the show's pre-teen audience might get "mad" like they did during the leviathan storyline when barnabas turned nasty again?
Perhaps. But it wasn't just the teen audience who disliked evil Barn during Leviathans. The daytime magazines were flooded with letters from adult viewers complaining.
by making previously "bad" characters like barnabas and quentin "nice"(or at least nuetral)it actually does them a tremendous disservice and nullifies alot about what made them compelling in the first place.
True. Though in the case of Barn it might be less of an issue because they never truly reformed him. Even while trying to save the family or solve some other crisis, he still managed to do many (some might even say far too many) decidedly unheroic things. But with Quentin it was, sadly, a different story because after 1897 he basically lost much of what was most appealing about him in 1897. After 1897 Selby didn't get much good material to work with unless he was playing some alternate Quentin.