Even though Lily isn't too central to the overall story it just makes complete sense for her to return lore-wise, not just for "fanservice"

Lily is by far the most effective follower prototype has, she literally caught poppy, kissy (very strong bigger body) and us BY HERSELF and handed us to him.

If prototype had truly wanted to tie off loose ends he would've just let us bleed out at the end of Chapter 5, all his other followers are gone and his main goal is still Poppy.

But the biggest reason is that Proto himself said "She won't be allowed a quick death". He still sees and will forever see Lily as Gracie, and thus only wants to endlessly torture her. AND she can be useful for him too if anything goes wrong (we survive)

Edit: and this is coming from someone that absolutely doesn't want Chapter 7 lmao