I think Blue Dahlia would fit perfectly where Desire is, and is a better track than Desire in almost every aspect.
Blue Dahlia is a fan favorite song, and maybe in the top 3 or at least top 5 from the Handwritten catalog for most Gaslight fans. So I think that would be why many people are confused as to why it was left off the album. The song is damn good.
You exaggerate the point of people saying it's the best Gaslight song ever. And your point of the key change interrupting the flow of the album is weak. I don't see it nor would I think it'd make one difference for the "flow".
I love Handwritten and I couldn't imagine any song not being on there. If you switch Blue Dahlia for Desire, that'd mean it would follow Biloxi Parish and Desire would follow National Anthem (assuming you get the deluxe version, which means you get all the songs anyway). Blue Dahlia is probably a stronger stand alone song, and that key change does catch people off guard on a first listen.
It's also ok to have a great song as a b-side if it has the qualities of a great stand alone track. She Loves You was left on American Slang and that's also a fan favourite. I just believe it stands alone as a bSide stronger than We Did It When We Were Young. It's the digital age of music, and b-sides are a lot easier to get now than in the tape and cd age if you ever had experienced that. I guess in this case you could reorganize the track list on your own to better suit your preference.
Excited to hear what the new material will sound like. Hope they have lots of b-sides for us again to go with album.