Yes, you can do twin heads (+2 to cast) and Master of Sorcery (Loremaster, any rulebook lore) on a normal Lord of Change, although it does blow the whole gift allowance to do so. That said, if you want a level 4, the total does come to 635 so you'll have to be playing more than 2500 points to fit all of this in or something has to go.
Yes, daemons are top tier. Undoubtedly. At least with low or zero comp. I found that they got pulverised by comp in 7th (to the point where I often felt they couldn't compete in many cases) and even now in 8th they still seem to get a raw deal from comp. Certainly I saw a lot of Daemon armies at the top tables in Ard Boyz final, 3K and no restrictions still leaves Daemons a prime candidate for top army.
Still, they certainly took a hit in 8th. In fact, some elements of 8th seemed specifically designed to curb daemons. Regen or Ward as a rule seemed designed purely to keep Nurgle daemons in check, which is a shame for the game if that's the case.
These days, in a moderate, normal level of restrictions, daemons are top tier but the tiers are much closer. Daemons, Dark Elves, Warriors, Skaven, Lizardmen form the top tier (plus Ogres, probably). There's not a lot of difference between them. Looking at the Rankings HQ army rankings for the USA gives reinforces this.
Certainly Daemons aren't breaking the game anymore. Indeed, Warhammer is better balanced than it has been in a very long time and it is getting better as more 8th ed books are released.