"I was extremely thankful that Lee was allowed to have -- and, more importantly, articulate -- some misgivings about the Babs situation."
Yeah, absolutely this. It felt like it had been a long time coming and needed addressing.

"It was also nice to see Harvey approach the Jim shooting like a case"
It was SO good. And so well-done in that you could see the echoes of 'I come up here and work on paperwork to keep myself sane' in how clearly desperate with worry he was through it.

"I was definitely wondering what's suddenly up with Babs and Oswald. And is Selina still a part of that submarine plan?"
Agreed, again. Everything seems to be flitting around a bit too much. Hopefully it'll be explained in the next episode. Maybe.

"I guess we have a BatCat shipper here?"
Confirmed (awwww cute!)

"New headcanon: Jim gets completely shitfaced at every GCPD office party and Alvarez' drinks are to blame. As for the way Harv behaved... We all know why. ;)"
I mean, all of this is just facts to me :p

The amount of characters (especially Jim, but Harv that episode was also especially wonderful) who just hurl themselves bodily at gunmen in Gotham is a neverending source of entertainment to me. Nothing will beat Jim's flying tackle of Zsasz in Zsasz's sniping lair, though. Except perhaps that time Jim dived headfirst down the garbage chute...