Adding the extension blocks was not needed for Lightning, no. It was a concession to the parties who wanted bigger blocks. Ultimately it wasn’t enough, and they forked off anyway.

In retrospect, we probably should not have added that extra space, but it’s impossible to say with certainty how history would have unfolded if we hadn’t.

We could soft-fork in a reduction that cuts that back out, or makes it smaller. Or we could fork in a reduction to the main block size. It takes a hard fork to go from 1MB to 2MB, but only a soft fork to limit it to 500kb or less.