Re-wathced this episode, and it still has me thinking: why did Pericles kill Ed Machine? As he states in "The Horrible Herd", he was in his way, and so was Cassidy, so both were 'eliminated'. But in what way was Machine an obstacle to him? Maybe because he was Mr. E's (Ricky Owens, his old friend) henchman? Thoughts, guys?
Perhaps... if Ed Machine was out of the way it would only be Pericles and Mr.E... thus he would be closer to him and eventually use and control him easier. Another reason could possibly be he had no other role in the series anymore and he had to be killed in order for the story to move and no viewers wondering where on Earth did he vanish.
Your first theory sounds quite reasonable. As for your second one, I do agree that maybe Ed didn't have any role in season 2, so they got rid of him. Besides, Pericles gives not even one hint on why he killed Ed.