I have now tried out the alternative end to the 'Lose a life' routine, and removed the code in 'Room setup' which wipes the bottom screen-third.
Another option I'm considering is, instead of just erasing the expired lives, print over them with a bespoke 16x16 graphic indicating their demise. The code which animates the remaining lives wouldn't touch such graphics, I believe.
As per the above, instead of the expired lives being overwritten by a blank sprite (32 contiguous zeroes), I have printed a modified version of the Barrel sprite in their place. (With the three 'X's being replaced by the letters 'RIP'!)
I have also tweaked the 'Draw the remaining lives' routine so that the consecutive lives appear in different animation-frames - like in Geoff Mode, but I have gone further than he did so that the adjacent lives are updated at different times as well.
It all works fine.