I think that direction *was* still plausible even after the ending of S2. Nikita had, after all, chosen Section, albeit reluctantly. At the time, I also believed that both Michael *and Madeline* recognized that fact -- I took Madeline's urging Operations to refrain from cancelling Nikita outright as a way of buying Nikita time until Operations cooled off and could see things more objectively. I ended that season hoping that the following one would explore a new, unwary truce between a now-more-mature-and-less-prone-to-black-and-white-condemnations Nikita and a Section that was coming to value her strengths more and more.
Yes - you've put into words that feeling that I still had at that point. That we'd reached the point where Nikita had accepted, even chosen, Section as a place she was going to be part of - and from that point they could all move forward and finally tackle, you know terrorism or the big bads or something. Mission Impossible here we come.
S3 went in a completely different direction. And for the first time, I suddenly find myself wondering why? They had a functional series, they couldn't have wanted to kill it off....so what possibilties were they seeing?