I'm mentally chewing on the idea that maybe Caterina favored Lucanis, but would have given the title of First Talon to Illario if not for his evil-mustache-twirling machinations. We know she's astute, perceptive, and ruthless. I don't think for a second that she didn't know Lucanis was soft-hearted, no matter how good an assassin he was. What he did in the Wigmaker Job had to have gotten back to her - that's how Lucanis got the name of "Demon of Vyrantium" after all. He freed the slaves. He administered a punishment to Ambrose Forfex, not just a cold assassination like he was supposed to.
Everyone is also familiar with Illario's style of assassination. The Crows joke about how he shirks his work and how incompetent he is, but it reads more like one of those family jokes that persists forever, despite how hurtful it's become. But even though Illario will never be as good an assassin overall as Lucanis, Illario does have a type of job he excels at that Lucanis can't do. Caterina would have been aware of Illario's skill at charming people, and also that he can be just as ruthless as she is.
There is the assumption amongst all the Crows that Caterina would have chosen Lucanis to succeed her as First Talon, and it's based almost solely because she favors him. And while that may be true, the favoritism seems more affectionate than professional. We don't see Caterina and Illario interact much, so it's hard to definitively say what their relationship is or isn't like. But when we see Caterina speak of Lucanis, she says "grandson" with fondness and calls him "my poor boy". Unfortunately for Illario, I do think it's true that she loved Lucanis more, but I think that also suggests that she probably knew he didn't want the role of First Talon and moreover that he wouldn't have been well-suited for it.
Meanwhile, we know from how she brought up her grandsons that she was focused almost entirely on their survival. Her cruelty to them throughout their childhood was to prepare them for the cruelties they would inevitably have to face as master assassins and - ultimately - her successors. She had to have survived as leader of the Crows by being merciless - especially with such a small House after the murder of almost her entire family - so a future First Talon would have to be equally so.
Lucanis has proven himself to be merciful. The Venatori picked up on it, and Caterina undoubtedly did too. Mercy and compassion are wonderful things, but in a leader who tries to right wrongs and punish evildoers, they are also things that would make that leader a LOT of enemies. Enemies who would - without hesitation - strike at the First Talon and anyone they care about. On the other hand, a First Talon for whom contracts are strictly business, who has no reservations in doing the "wrong" thing, who doesn't keep track of whether the targets "deserve" to be killed or not, is a First Talon who would maintain cordial relationships with clients no matter their morality. Illario would have been that Talon. His contracts are transactional, and despite charming targets and feigning affection for them, has no trouble killing them and barely thinks of them afterward. In "The Wigmaker Job", Lucanis expresses condolences when the lead guard Illario flirted with had died. But Illario didn't even remember her name and didn't care what happened to her.
Given what we know about Caterina, it's reasonable and logical that she - as someone who understood her grandsons and what being a First Talon entails - would have chosen Illario for the position, no matter what her personal feelings about the two were. Illario would have made a ruthless and business-like First Talon, and Lucanis - being the loyal sap that he is - would have been a stalwart protector who could have kept both Illario and himself safe. But after Illario's plotting, and after he lost openly in combat against Lucanis, Caterina couldn't give the position to Illario. He had lost too much face with the Crows, both by striking against someone in his own House and losing the battle in front of literally everyone. So she had to give Lucanis the First Talon title in the end.
I don't blame Illario for coming to the conclusion that he would never be First Talon, because he had been conditioned to believe Caterina thought nothing of him. But the tragedy of most family conflicts is that so much pain and suffering could have been avoided if all of them had just, y'know, sat the fuck down and talked about what all their intentions were before making huge announcements or plotting their brother-cousin's downfall. But no, they all had to be drama queens about it, which I guess is very Antivan of them.
