My opinion on prototypes is about the same as always. They serve no functional purpose, and there's a very good argument for simply removing the prototyping process entirely. Arguments that prototyping allows tinkerers to figure out the value of certain design choices hold no water, because what happens on missions depends on so many variables that it's essentially random. A gauss rifle will never penetrate protectorate armor... unless the user is really competent, happens to roll well, has their power enhanced by plot, PW forgets that the enemy is wearing protectorate amor, PW forgets that gauss rifles aren't that strong, etc...
As a tinkerer, I somewhat like having my stuff be used. Obviously, I'll enjoy it more if prototyping stays, because it serves as free advertising and gets my stuff used more often. I'd also like it if equipment was given to a person, and they get to keep it, because then my stuff will be used in every mission that person participates in. This isn't the core of my existence though, and I'd be mostly fine if none of my stuff ever got used.
I can't really comment very well on balance, because I think things are fine as-is. I don't think using prototypes as a mechanic to boost newbies is good, though, because it's too variable and random. Some people will get +10 deathtubes of skewering, or +5 upgraded ultra assaultsuits, while other people will get the "slightly better assault rifle!", or worse, the "+1 pistol of cheapness". Even if the prototype assignments are as fair as possible, our shipments vary widely in volume and composition--sometimes we ship lots of high powered WMDs, other times we ship a small trickle of cheap things.
@To decapitate, or not to decapitate
My opinion is that decapitation is clearly wrong. I think it's highly unlikely the shuttle will be killed if it sits for an extra turn, and even if there were eight full corpses, they could probably all be loaded by one guy saying "I load corpses".
It's a good IC event, though. I like to think Elias was panicked and terrified out of his mind (which happens far too rarely), and was making bad decisions because of that. I do dislike that he said so much stuff he was probably sitting there arguing for five minutes at least, but people probably won't stop abusing their free actions any time soon.