I've been using Aranea for some time, now. She's been awesome. But i know she doesn't level and can't use armor very well (if at all). J'zargo can use armor and a weapon, if I want him to be a battle mage.

Should I let Aranea go? Upon release, where does she go?

I'd guess she would go back to the Shrine of Azura. She should be able to level up to 30. If you like her, keep using her. But if you want to try something else, go with J'zargo. You can always switch back.

I let her go and took J'zargo. She was quick to leave. That svcked. She was a good follower. We'll see how the cat does....

Yeah, she goes back to the Shrine of Azura.

You can increase your follower's level (only up to their max - some go higher than others):
http://www.gamesas.com/topic/1338573-how-to-reset-your-followers-stats-so-they-will-scale-to-your-level-xbox-ps3/

There's a link in that thread that lists all followers max LVLs.

I used the staff on Aela ... before she got stuck in the Temple of Talos in Markarth. So my best follower and wife is now forever stuck.

So I have used it and it works. I'll see how J'zargo holds up.

what kind of character are you?

because if your a stealthy character you should ditch j'zargo and find marcurio in riften, he may not level as high as j'zargo or wear heavy armour, but he is a lot more competent (something about his AI is just smarter,) and he casts better spells (while j'zargo is a higher level, he continues to cast only weaker spells).

Wow. J'zargo just went down on our 2nd quest- Break of Dawn. Malkoran was the toughest I've fought ... and I've done all main quest lines but the Dark Brotherhood.

Damn. Aranea it is.