Your synopsis of Nancy in 1985 is 100% correct. Nancy was buying drugs at a disco and taking them. Larry Ewing even went undercover with the drug dealers in the Summer 1985 storyline which was clearly a Miami Vice ripoff.
They did talk about Pammy returning in 1988. I wonder if Harding Lemay changed this to Iris when he was rehired as headwriter. Jason Frame's two daughters were changed to Sharlene Frame and Josie Watts. I am sure that Lemay did make this switch.
Judi Evans Luciano could have been a Nancy recast in 1991 rather than recasting her as Paulina. You are correct, all the Paulina storylines could have been Nancy's stories. I'm sure Nancy would not have liked Rachel marrying Carl. Also, when Joe Carlino was introduced they made it a point to say he dated Nancy in high school, so it definitely could have worked by bringing Nancy back.
I realy do not remember if they had scene together. May be they did at the time Clark was Bou Rivage (do not know how it is spelt lol) and the Queen Mary story. Donna was model then. Do you know Carrie is a Cheff i read it somewhere. She works at some restaurant and may be travles a lot. Dan lives in Italy as Clayton Norcross does too.
In it's first week on air 'How to Survive a Marriage' averaged a 20 share in the 3.30 timeslot. That was one share under what Return to Peyton Place had been doing.
I guess NBC hoped for better but were probably realistic that a new show would take time to build. However HTSAM never seemed to gain momentum and was cancelled.