It's a comedy, so one could say that there will be some artistic licence as time goes by. Realistic yes, but not totally. The most obvious one is Compo's war record. In the early series he is presented as having a war record of avoidance that was in keeping with the character, in one episode he even talks about when he deserted. Later on as Bill Owen's health is failing, they produce an episode where we discover he was at Dunkirk, which presents him in a totally different light, more heroic. It's probably fair to say that had we known this about the character from the start, it's highly unlikely that Blamire and Foggy would have been so dismissive towards Compo. So, it is a major change, but it doesn't really matter as during those first few years Clarke could hardly have imagined that he would still be writing the character 20 years later and Compo deserved a bit of a heroic send off anyway.
I guess thats one way to interpret that episode, but everything I've read says they had no idea Bill Owen was in bad shape until he showed up to start filming it. So if it was written as a "send-off" episode it was done more in a general "he's probably only got a few years left" kind of thing rather than a specific response to his then-current health.
Instead, we have to remember that it was going to be the millenium special episode that was going to air around Jan. 1, 2000, so a military service themed episode makes sense given the main characters are of the WW2 generation. I think Clarke choose to make it about Compo because he was the most popular and beloved character on the show, not because of any sense that it might be one of his last episodes.