Regarding your questions about the Sanford & Green novelisation:
Yes, the idea of Erique being Christine's biological father was in the original script - and it was removed because the studio was worried that The Phantom's feelings for his protege came across as incestuous.
You can learn all about it by watching the documentary hosted by Scott MacQueen that is included on the DVD of the Claude Rains film. MacQueen also comments on these cut scenes in the commentary track he recorded for the film.
It's interesting that you say in your review that there is no sexual undercurrent to Rains' Phantom - since those scenes were cut precisely because the studio felt that the sexual undercurrent was still there, in Rains' performance if not in the original script.

