Sarumian, my problem with your scenario is that I don't see Denethor's madness as some external 'shadow of the Enemy' (although Sauron certainly did much to fuel it) that could be removed the way Aragorn healed Faramir, Merry and Éowyn, but as an affliction of the soul that had its roots in who he was or believed himself to be. For that to be healed, he would have to be both conscious and consenting. (Éowyn is a good parallel - Aragorn could heal her arm, but not the despair that had driven her to seek death on the Pelennor in the first place; the latter could only be healed by Faramir's love and a change of mind in Éowyn herself.)
What I like about your script is that it gives Denethor a chance to achieve something important and die an honourable death (what does he die from, though? Exhaustion from the mental and spiritual exertion of his duel with Sauron, probably); also that you reach the same final outcome by a different road - he still dies, and the palantír still shows his burned hands. Nice!
Why Denethor had to be made harsher - I think it's probably got to do with Tolkien deliberately setting up Denethor and Théoden as contrasting ruler figures. I can't quite remember where I've seen this observation elaborated (maybe Shippey maybe somewhere else), but it's given in nuce in Gandalf's words to Pippin immediately before they meet the Steward:
Quote:
Théoden is a kindly old man. Denethor is of another sort, proud and subtle, a man of far greater lineage and power, though he is not called a king.
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Maybe the Prof felt making Denethor too understanding towards Faramir, and thus having the reader sympathize with him more, would weaken the contrast?
Another aspect of the Théoden/Denethor-contrast: the 'carreers' of both characters, from the scenes where we first meet them to their deaths, in a way mirror each other. Théoden begins with his spirit paralyzed by Wormtongue's manipulation, but with Gandalf's help he regains his energy, overcomes his enemies and dies as a victorious hero; whereas Denethor begins in full possession of his willpower and mental faculties, but is gradually eroded by both Sauron's manipulations via the palantír and the outcome of his own decisions until he succumbs and takes his own life in despair. Having him survive and be healed would, of course, utterly spoil this elegant symmetry.