Why Saruman's role was diminished after the first film, and Why Peter Jackson rewrote him

My brother actually explained to me why Saruman's role became less and less after the first film in this trilogy.

It was because the higher-ups who originally gave the wizards their powers were angry with what he had done, and punished him by stripping him of his magic and giving it to Gandalf when he "died" and was "reborn" as Gandalf the White. That's why we only see scenes with Saruman in his tower at Isengard after the first film, and why he wasn't using magic anymore, only simple alchemy to create that bomb that was used to breach Helm's Deep. They don't tell this in the films, but you can find it in the written lore.

I have two explanations for Saruman's death in the films. The first is, I think Peter Jackson was pressed for time and couldn't include it, and was possibly trying to avoid an R rating for the third movie.

For the second, I found out randomly on Quora, that Saruman had a very different fate in the third book compared to the films. Some book purists were angry that Peter Jackson didn't include this, but he had some strong reasons, which I'll explain below.
Anyone remember that horrible vision Frodo had in the Mirror with Galadriel? The one that showed the Shire in ruins, all the crops burned, and Hobbits in chains? Well...that sort of actually happened in the third book, but not by the hand of orcs. Apparently Saruman snuck away from Isengard and took revenge on Frodo and all the hobbits by covertly taking over the Shire (with evil hobbit front-men, of course), and the place was ruined while Frodo and his friends were away. They came back and were horrified to see what had happened to their homeland while they were away. (This entire time in Hobbit history is called, "The Scouring of the Shire.") They ended up having to band together and use the skills they had learned during their adventures to suss out what had happened, and how to stop it. Saruman eventually was killed by one of the hobbits (I don't know which one) and the Shire was put back to rights over time. Tolkien apparently wrote this part of the book to show that war can hit home, sometimes literally, when soldiers come back from the war and find their homes have been destroyed, and they are already suffering from mental scars that will never go away. You then ask yourself, how do you cope?

Peter Jackson changed the writing because he felt it wouldn't add to the film at all, and the audience had already been through enough with the wars going on in the big world, and deserved a happy ending involving the hobbits coming back home to a place that had been untouched by the War of the Ring. So he rewrote Saruman dying back in Isengard, rather than sneaking off and causing trouble in the Shire.