Just some thoughts.
Regarding a player deciding, for whatever reason, that he doesn't want to continue to play a particular character...
1. Sounds to me like the first guy didn't want to play the Paladin. He wanted to play the guy with the cool sword. If that's all he wants, it's a DM call as to whether or not this guy gets the sword. However, up and getting rid of an item on a whim is wrong.
2. Committing suicide. What a joke. A character becomes something that the player doesn't want to play so he has the character commit suicide. Whatever. That, to me, is mildly shortsighted. If you don't want to play the character, talk to the DM about changing characters. It's all for fun anyway. And screwing (in a small OR large way) another character/player in the process is just bad judgement.
3. As someone who has on occasion simply changed characters in the middle of a campaign (where the character was still alive), it's my opinion that there's nothing wrong with that. It's a game. It's fun. Or at least it's supposed to be fun. If something happens with the game, with the character, with the group, whatever, that makes the character no fun to play for you, by all means, change.
Nearly everything that happens in-game has an effect on the players and the characters. Sometimes those things are little. Sometimes they're big. A character loses an arm. Okay, the player doesn't want to play a character without an arm. That's not fun to him So he switches. Fine. What's wrong with that?
But handling such a situation (either by the DM or the player) in such a way that messes with another player or character. That's just stupid.
LIke I said, just some thoughts.