I don't understand why you can't dismiss a leader. Mordheim is far from the most l337, balanced rule set in the miniature gaming world. GW never wrote the tightest rules in the world, was sometimes a bit inconsistent, and often forgot a few things.
There's 101 fluffy reasons to dismiss a warband leader. There's 101 fluffy reasons to not dismiss a warband leader. So do whatever the heck you want. It's Mordheim. Hell, the fluff reasons for dismissing a warband leader would vary wildly from one warband to another.
The rules are vague, so do what you want, but talk with the other players first. It just seems super silly that you can't dismiss a warband leader, but you can shaft him in gameplay to get him killed. Why go through all of that fuss? I say if you want to replace a leader, go nuts! And if I was playing with people who were so bent on the RAW to say I couldn't dismiss my leader under the rules, I'd just walk my leader off a friggin' building every game and wait for him to die. There's nothing in the rules that says you can't do that.
Rules and fluff have an unhealthy relationship. Common sense should prevail, especially in a game like Mordheim.