Theories

The developers stopped caring about Lee after Tekken 2/TTT

I always thought it was weird how central of a character Lee is to the game's story and how he was written to be involved in early games. With the introduction of yet another Mishima, it's really telling how much of an emphasis they want on "bloodlines" and how little weight they put on adopted children in comparison. Lars being added was a surprise, but he worked out in the end being a bastard son of Heihachi (who would want to fuck Heihachi like that...probably an old woman too like him but that's really irresponsible at their ages!) and it played well into the story. It's really unnecessary and unlikely that someone as old as him would have another child - it would be a test tube baby...; Lars was a surprise enough!

It seems in media other than the games they cared more for Lee's relationship to Heihachi & Kazuya. Take a look at the Tekken 2 Manga or the comics which I go into more detail on the relationships page. It's very clear that while not necessarily canon, thought was put into how his relationships played out.

I put my scans up here if you want to see more.

The "blue lipstick"

I have to explain this one to anyone who didn't play Tekken in the 90s LMAO

Basically, in Lee's T2 ending, due to graphical limitations Lee's lips appear to have blue lipstick. You can see some discussion of this on the various Lee fansites I have linked. To be honest, I think if it wasn't a lighting error that would've been SICK because you know your girl has a love for men like Omega-M

Tekken 3 & Ogre

Ogre shared some of Lee's moves, so it was fan speculation that Ogre had killed Lee because of this and how he was absent in T3. Of course, this didn't end up being true at all. Maybe they thought about it, but regardless, Lee's a staple of the series and has appeared in every mainline game apart from #3.