I always have mixed feelings about the Leviathan jaunt - I've never bought it as the complete turkey it's purported to be, but I think that it just came at a time when the overall nature of the show was shifting, along with its priorities.
For example, I'd say that most of 1968 is just as silly and illogical, and in great chunks just as dull. I think the real problem lies in the increasing shift to plot-driven drama, and perhaps a general boredom with the present day scenario.
One of the problems with 1897 long-term was that it went on way too long - it really did disrupt the present-day continuity in a way that 1795 didn't. Part of me wishes that they'd simply stayed in 1897 and built a new show from there - I think they had generally had a community of characters of equal quality, and the Victorian backdrops fitted the show's ambience in a way that a miss-mash of Gothic meets Orhbach's never could...
The one thing Leviathan gets totally right is demonising Barnabas - the nice guy thing had really worn thin for me and it was an ideal way to extend the character (bear in mind that a lot of the viewers wouldn't have been watching the initial Barnabas story). In many respects, Barnabas the villain was enough story - and it was a better starting point than the abstract Lovecraft rip-offs. In 1967, Barnabas was electrifying - he was dangerous, a plausible liar, an arch manipulator, beyond trust - he just made for great storytelling. If they could have recaptured half of that essence, it could have been amazing.
The problem was that the main attraction became lost amidst a fairly underdeveloped story that didn't really use its characters - which brings me to plot. There seems to be a real disparity between being true to the dramatic situation and giving the audience a perceived want... Take Quentin for example - In 1897 he had purpose and drive, but in the present he simply has nothing to do and meanders. He should not have been reintroduced without a proper story or purpose, and it damages both the character and show in the process.
Likewise, there seems to be a lack of faith and enthusiasm for the story itself - characters chop and change roles as the story demands and you lose a sense of immediacy and belief. Admidst this major loss of faith comes a bunch of dodgy additions aiming for nostalgia - Nick Blair, Angelique's bizarre Samantha Stephens-esque jaunt into suburbia, etc. And while this is going on, the writers seem to miss huge opportunities to get the audience back on track.
Carolyn's wedding always bugged me - weddings are such a soap staple, easy money in the bank. It irritated and disappointed me so much that one of the original characters was married off so forgettably with zero emotion or romance whatsoever - a real case of DS forgetting that it's a soap opera. A week-long wedding story, with some genuine happiness, with the threat of darkness lurking beneath the surface, could have been fantastic I think...
Leviathan is a story I want to love in spite of myself. Beneath all the mistakes there were some major opportunities, but they're lost amidst a lack of conviction - if there's one thing the story lacks creativity, it's joy. It seemed to have stopped being fun for the makers, and inevitably, viewers usually follow suit.