1: You could keep Luna in your team as long as you like, it wont cause any bugs. But if you do, you wont be able to progress the BSM quest line. If you play for the rebels you would have to let him go for the "Rescue Tanya" mission where you need to go alone. On the other hand, if you turn him in you'll get two other mercs for free, Kelly and Rob Yu, which both has better stats than Luna (I think
).
2: To fix the head issue you need a new character model for him, one where the head and body is in different AZP packs. The body should use the standard AZP pack for RPC's, the 000_body or one of the other RPC packs.
Then you need to find a head that resembles the dialog pic somewhat, and that too needs to be one of the RPC ones since those are set to use helmets and NVG's.
Finally you need to add him to the RPC list in the MERCENARIES file in the ini folder so that the engine knows that the character should change model when some new equipment is worn.
So let's recap:
You need an Luna.azp archive that contains 2 files(ACTOR.ACT.DESCR and ANIMINFO). In the ACTOR.ACT.DESCR you need to call the new head and the standard merc body.
ACTOR.ACT.DESCR should look like this:
COPYFROM Body 000_body
COPYFROM Head Luna_Head
END
Then you need the new head, rename the one that fits Luna to Luna_Head.azp and call that in the ACTOR.ACT.DESCR in the Luna.AZP archive.
Then finally add the merc to the MERCENARIES file and Luna should work as a "real" RPC.