LRA Election
The only legitimate power in a republic lies with it's citizens. The RA is only as good (or as bad) as it reflects their choices. If there are more citizens that support a faction they should end up with greater representation in the RA. Our system is broken in this regard, because if tends to give close to equal numbers of votes to each faction, which effectively makes the number of factions that belong to a given coalition more important than the citizen's votes. Giving the LRA to the faction with the largest number of votes was an attempt to fix the problem, and I agree it was not a good solution, but with the current system in place it was what we had.
My guess is that the CDS will have a very hard time addressing the problem of unequal representation, but if we take our claim to be a democratic republic seriously, it is a problem we will eventually have to solve. If the RA elects the LRA and we do not address this issue, it will take us even further away from having meaningful elections. So, personally, I would much prefer the internal election of the LRA, but only if it comes with equal representation.
Chancellor Election
My issue with directly electing a Chancellor has nothing to do with the election per se, but with how this is likely to change the role of the Chancellor. Right now doing a good job as Chancellor is difficult -- it means leading an all-volunteer team working with virtually no budget to actually run the CDS. Basically our Chancellor is our chief volunteer coordinator.
Direct election will make the Chancellor more of a political officer and less a volunteer coordinator. Past proposals making this change envisioned a Chancellor who has a role in drafting legislation and using a veto to shape its passage. Something closer to the role of the US President. My guess is that if the Chancellor is directly elected, this change will be inevitable. Directly elected Chancellors, like the President of the US today, will praised or blamed for things that depend on legislation.
Unlike the US government, our executive does not have a budget for payroll at RL rates, nor a cabinet. So far our Chancellors have barely been able to keep up with the demanding managerial role and still have some time for RL. A shift to more of a legislator-and-chief would either leave the everyday tasks wanting or will require that we increase the staff and resources available. I could imagine at least a chief of staff (and more staff) to make sure the managerial work could continue. I can't tell if this is a good or bad thing, but it seems to me that a larger, (perhaps much larger) executive branch will be needed if the amendment is passed.
Second, an elected Chancellor would centralize more power in the hands of one party and one person. I have not yet released the numbers from the by-election, but consider the last full election. CSDF had an absolute majority of first ranked votes (not just the largest number, and most of those from un-factioned voters). A CSDF candidate might have won. Given a strongly political role for the Chancellor, imagine the problems that might have been caused if other factions objected. There are some functions that should be carried out without always being a subject for political debate. The current Chancellor position, with a less political role, can keep things running and the lights on without that overhead.