Motherf**ker didn't need to shoot kids in the face in the movie, but he could've brought more of his gang and had them f**k more s**t up than he did (like in the comic). Changing Katie to Nightb**ch made narative sense as the first movie wasn't 100% true to the source material (I believe Katie never dated Dave in the comic, and Dave was only tortured in the first movie not interrogated), so they had to make a few minor changes. However, I think the actual rape probably should have happened. Maybe not shown, but certainly strongly implied (I'm thinking along the lines of Death Wish 3, where we see her get attacked and her clothes ripped, and it's obvious what's about to happen, then it cuts to the next scene). For one thing, it intensifies the rivalry between Kick Ass and Motherf**ker. For another, it's a very real danger that any woman who decides to become a RLSH might have to face. Seriously, I'm surprised it's never happened to Batgirl. But that's just my opinion.
As for Times Square, I kinda figured it was a budgetary issue. But I still think they could've found a better location than Motherf**ker's lair. Just off the top of my head? Set the movie during November or December. Have the supervillains attack a shopping mall when it's packed with Christmas shoppers. Kick Ass and Hit Girl show up with Justice Forever and save the day. There you go, cheaper than Time Square but more in line with the comic.