Your circumstances may prevent you for going where the action is but if you have no family obligations always be able to move to where that economy helps y'all.Good luck to both of you!

I have a tenant who can be erratic & make poor decisions that have effected my condo community and pissed off the HOA, neighbors & me to no end, so I've chosen not to renew his lease.  My concern is that he is...

In my case with this 1920s house, it's going to prevent opening up the 1st floor, due to sitting between the wall separating the living room, and dining room.If it was on an exterior wall, I would still want to frame it in and make use of the space.

All the negatives that I read above are preventable if you do the research beforehand. 

These problems are best prevented by removing any source of confusion. 

Looking back, is there anything more you could have done to prevent/decrease issues?

In my view, homeowner's insurance + umbrella + professional property manager should be good enough to (i) prevent lawsuits and (ii) protect you sufficiently if the worst happens. 

My plan is actually to move to Vegas in 3-5 years (wish I could move sooner but my job prevents it). 

Or does the fact that Arizona doesn't allow the formation of Series LLC's prevent me from even moving one in?

This prevents sophisticated professional tenants from filing an appeal to buy another free month.