I agree that the best answer is probably a bit of all three explanations - although strictly speaking, Michael could have kept Tom as consigliere, at least officially, and continued to receive all the counsel from Vito that he needed, and thereby have the best of both worlds.

Fundamentally, however, I think it's because Tom in fact was not a wartime consigliere. Tom seems to have been a superb analyst and strategist. But he was basically a gentleman by temperament - notwithstanding the dirty deeds he'd done. He simply didn't possess the killer instinct of the Corleones.