There's so much that could be done to the ride given the ride budget towards themeing. The Inception music makes something pretty obvious - why not theme the ride to the movie Inception? building a circular "cityscape" around the ride (more along the lines of a Vekoma Madhouse like Alton Tower's Hex) would create an unimaginably disorienting experience. Especially if there were a "street" constructed on the back wall, with some cars sideways and trees growing down from the ceiling amid the curved skyscrapers. But again, that would involve a LOT of money and STILL the ride experience itself would be admittedly sub-par.
As for why the lava, etc. was removed, I think there are two reasons. 1) It wreaked havoc on the ride itself. People here with far more information than me will tell you just how damaged that ride was due to its interactions with water. The leaping fountains, the mist, and the fog were too much to handle since the ride was not "weather proofed." It was not constructed to operate outdoors, because why should it? It was in a building, and would never come in contact with rain or snow or wind... Right? Also, mist and fog never set the fire alarm off before... Look at the photo I posted of the lava pits. You can literally see the red theater lights shining through the fog - that's how thick it was. And mist by definition is composed of water, so no fire alarms there... Maybe it depends on what the base of the fog is, water or chemical.
2) There is a very, very, very extensive protective copyright for Tomb Raider: The Ride. Really consider: would Cedar Fair have removed something they didn't have to remove? It cost them time and money to take down the stalactites from the ceiling, and if they could have stayed they doubtlessly would have. I have heard from the operations director of Rivertown that the ride was the most protected legally by Paramount Parks, to the extent that, without renewing the Tomb Raider license, the ride was forbidden to feature ANYTHING relating to Tomb Raider, including adventure, a jungle setting, seeking an ancient treasure, goddesses and gods, saving the world, a battle of the elements fire and ice... That being said, a "crypt" really is a pretty smart re-theme. Can you think of anything else that utilizes as much as possible without nearing a "tomb raider" theme? I certainly can't... And look at the ride now. It is not of the "adventure" genre, but of the "horror" genre. And there is no fire or ice. It's not jungle-y. And no goddesses. And no ancient treasure hunts... They've kept all that they could while removing only what they had to.
And I agree whole-heartedly with The Bat demon. Frankly, I think it would be "Scarier" if it were turned off and painted like stone. As it is, it's truly the cherry on top of the joke... A clicking, hissing, barely-audible growling pink bat. Could it get any worse (did I mention it has nipples and armpit hair)? I have often said that (especially now that the pre-show room and antechamber are separately filled), it would make sense to have The Bat's raspy, demonic voice tell a short voiceover about how he is a fallen angel cursed to guard a crypt of evil spirits, and that you have been locked in. The only way out is to progress further in and challenge the spirits themselves. A 30 second, pre-recorded voiceover and at least the ride would have an inkling of theme. Then, the old "lava pits" are a pool of blood, the water-y lights on the goddess, the Inception music, and voila... At least a more well-rounded ride. Also, if it continued around and flipped even one more time, it would at least seem "worth it."