Yeah calling it a cliffhanger only makes sense from 25 years in the future. That was the ending. The ending of s2 was Lynch's somewhat polite fuck you to the network. Still a heck of an bold ending to a series that was mega popular at the time. Then FWWM came out afterwards once he had regained his chill. I think the actual shame of not being able to be in s3 was Bowie, but he was nearly dead? when they were going to start filming. At least they got Albert before he croaked, he was always one of my favs in show, aside from Lynch's Gordon.
As far as S3 goes, Belushi and his entourage of muscle and bimbos needed a spin off. That whole group was great.