I think the best way to approach the issue would be to just not mention him again, and allow the viewers to use their imaginations about his quest. Sort of like they did with The Joker after Heath Ledger died.

That’s what I think they’re going to do with Greef Karga

Or kill Greef Karga, since he's been having trouble with space pirates.

Leave Baylon Skoll's journey a mystery. Or adapt it elsewhere akin to The Clone Wars, like how they adapted some Darth Maul episodes into the Son of Dathomir comics. It is a bit of a long shot since TCW had more story and few episodes to use compared with Ahsoka where their story is a bit more linear in comparison. At least on Perida.

Overall, it depends on what they do. If they are confident enough to continue Baylan's story onscreen for Ahsoka S2 or whatever, that'd be cool. But I won't complain if they decide to focus their efforts elsewhere, which they do have plenty to develop. Ezra and Thrawn back in the galaxy far, far away...Ahsoka and Sabine in a galaxy further away. Like what will this be? Where will this go? I'm hopeful Ahsoka S2 delivers something better than S1, which wasn't terrible by any means, but in some ways disappointing. Like only 3-4 episodes (at most) out of the eight-episode season were worth rewatching, and Thrawn's grand (admiral) entrance to the live-action universe was not entirely grand, despite bringing back Lars Mikkelsen. But I digress.

I mean I guess they would have to have the character written off

Similar to how when Cara didn’t return to the third season of The Mandalorian, the show explained where she went

So its possible if Baylan doesn’t get recasted they could either explain what happened to him or just not mention him again

Nah. It's very clear that his journey is not over, so recasting the character is the better approach than just throwing away everything they set up.

Just recast the character. No reason to throw it all away when he is the best character. Many times studios have needed to recast an actor due to unfortunate circumstances including death. It's not disrespectful to the actors legacy, in fact. Most actors would probably prefer the role recast and given to someone else. No one can replace Ray Stevenson but that's no reason to not pass on the torch.

I think having Ahsoka and Sabine come across his gravesite on the journey to whatever it was he was searching for might be fun. A warning that, whatever power Baylan was searching for, is dangerous enough to kill an experienced Force-wielder.