I think the serial killer is the woman's son. She said he disappeared for a while last summer and according to the visiting detective, the murders out on Long Island were committed that summer. I'm also not sure that mentioning her son spends time in the basement could be considered "luring" Danny and Baez into the basement but I could be wrong. And finally, we don't know that she turned on the music, I figured it was her son and/or the killer.
I agree with you a thousand percent about Nicky. I never liked her and can't think of a single episode where she wasn't annoying. I can't be sure if it's the actress or the character that I dislike so much.....probably both. I'm also not an Erin fan but I do love Anthony and I also like Jack, the ex-husband.
ETA: I wondered why Danny didn't use his weapon too. Maybe he thought the lock was too strong or maybe he wanted to conserve his ammo.