Question: How did Io die and why didn't Gemma Arterton reprise her role? If she was resurrected by Zeus at the end of the first movie, why couldn't he do it again?
Question: Even though Hades is now mortal and powerless, why wouldn't Perseus kill him to avenge Spyros and his adopted family?
Answer: The easiest explanation is that would make Perseus a murderer. He's a good, just, heroic man and killing a defenseless person for revenge would be completely out of character for him.
Answer: No particular reason, she was filming Hansel and Gretel: Witch Hunters. The producers of the movie thought it would be easier to say she died, rather than recast her.