Thank you for your interesting and detailed response. I think your take is a highly plausible series of events both for Lee's somewhat less illustrious career and for events in Kentucky and West Virginia. I'm tempted to go back to the first update an add a few extra paragraphs to flesh out the skipped over details of the war based on your ideas.For one thing, Joseph E. Johnston was a notorious bullet magnet - Winfield Scott said of him that he was "a great soldier, but he has an unfortunate knack of getting himself shot in nearly every engagement" - so it would be easy to remove him from command in any timeline by just having him get shot at some other battle.
As for Lee, the events of this timeline wouldn't really effect his failed campaign in West Virginia or his defeat at Cheat Mountain - that happened in September 1861 and the diverging point of this timeline occurs in November - and following that he was sent to the Carolina's where he was in charge of overseeing construction of coastal defence until he was returned to Richmond in 1862 to oversee the strategic deployment of troops in Virginia.
With the British at war with the Union and taking the pressure off of the Confederacy, you could perhaps have Lee restored to favour in 1862 with a second, and more successful, campaign in West Virginia, driving the Federals out, disrupting the Baltimore and Ohio Railroad, threatening to cut the Federal states in two with (at least) the threat of an invasion of Ohio, and diverting Federal troops away from Kentucky and Washington DC, which would allow Joe Johnston's army to overrun the Federal capital and Sidney Johnston/Beauregard/Bragg's army to occupy most of Kentucky.
It would also give the Confederacy more authority in outright refusing to recognize the legitimacy of West Virginia if they occupied it at the War's conclusion.
Also, as a side note, the Confederacy agreeing to give up its claim to Missouri is going to cause unrest because Sterling Price is not going to accept that lying down.
Price initially opposed the Confederacy and secession but when the Federals seized the State Militia at Camp Jackson he took this to be an act of war by the United States against Missouri and took up arms in support of the South, fighting for the liberation of his state.
The Confederacy signing away it's claim to Missouri is likely to be seen by Price as a betrayal of his home state, and I wouldn't be surprised to see hostilities continue there after the war between the North and South had concluded, and Price was charismatic and popular enough a figure to make it a not insignificant, but ultimately futile, act of armed resistance to Federal rule.
Absolutely no doubt that there'd be die-hards such as Price on both sides of the border. There's not too many options available for them though. Either they can die in a futile act of resistance, migrate across the border or reluctantly acquiesce.