Looking at bitcoin's layered architecture (base layer and Lightning Network), can you explain why this approach was necessary? What are the trade-offs between transacting on each layer?

First of all we should mention that Satoshi from the beginning, he thought about creating a "payment network" on top of the Bitcoin blockchain. Read here the discussion.

Bitcoin onchain cannot be used as a payment network, no matter how small or big are the blocks. It simply cannot function properly for billions of users. Bitcoin needs a 2nd layer and LN need a base layer. Is kind of symbiotic.

Onchain = TRANSACTION network for final settlements, vaults, UTXO management. LN = PAYMENT network, for instant, small, cheap payments, with almost zero trace.

Think about onchain as being the SWIFT network, inter-banking at high level. You are not going to pay a beer with a SWIFT transaction. LN is like VISA or cash, for spending.

LN wasn't created because of the "block size war"... LN was prepared long before that war. LN needed segwit and once the bcashers started the war, it came the opportunity that segwit to be implemented.

No matter how low could be the onchain fees it is hard to transact onchain. I have been in Bitcoinlandia from 2012 and I used many wallets and apps. To use BTC as payment onchain you have to do a lot of flip flops with UTXOs and not leave a trace behind. Also the small UTXO management is a pain in the ass if the wallet app is not showing properly what you have to do.

With LN all that nightmare is gone. You only have to open a bunch of channels and you are ready to go. Indeed with LN you must learn how to do a proper channel management, but even so, I see every day that wallet apps are improving this process and make it easier for the regular user. LN also add a strong level of privacy that many ignore it, but if you do it properly, is the best way to use BTC and leave no trace. Indeed in the pre-LN era, you must do coinjoins and a proper UTXO management, but now, for me, coinjoins are a wasting time and sats, not necessary anymore.

Of course, the user MUST keep a good UTXO management and I always recommend the use of 3 levels stashing: vault, cache, spending

This way you can keep untouched your UTXOs in a vault and just play around with the medium size ones in the cache level, organizing all your levels and spending.

LN must and will go forward, no matter others will say, is the natural way that Bitcoin could evolve and be used as money. Otherwise Bitcoin will be converted into an "asset", staying only in useless vaults and people will use some shitcoin token in exchange. So the whole Bitcoin dream will die. It will be just like a "paper-gold". Totally useless.

Like Roy (Breeze) said in one of his articles: we should start now building businesses on top of LN, each business must have a system based on LN for payments. Is the only way going forward.