Only issue with that I can forsee is we cannot search on what all activity user ABC has done in Windchill before leaving.
This is not accurate. Deleting a user from Windchill removes them from the directory server but it does NOT remove them from the WTUser table. A flag is set in the table to show they have been deleted, but you can continue to search for things created by them. When this flag is turned on, "(deleted)" will automatically be appended to their name in the GUI.