Having actually played the beta myself now, I'm of the opinion that Lao is fine. The damage nerf seems irrelevant, 112124 into 44 in the corner went from 36 to 35.
From +12 to +7 means that Lao has to be a little more careful but the pressure, bait armor, or throw game is still there. If opponents are poke happy, you actually have a lot of options to deal with it. For example: crossover, walk back slightly and whiff punish, block the poke and continue pressure off their - frames, etc.
B321-Hat orbit's gap being widened is not fun and is going to take some getting used to. I imagine Lao will have to use B32-Hat orbit more often.
All in all, the hat dream is very much alive. (In Tempest at least. Hat Trick needs some loving, NRS pls.)