Spoilers for the entire series so far and moresome.
Bear with me, I probably don't make much sense. Am delirious with fever and all. Anyway, the big question right now is WHO. Why follows closely behind. Here's my theory:
Who? Celeste did it. Only, she didn't. Celeste hired Clarence Weidman to kill Veronica. However, the plan backfired and Clarence accidently kills Lilly. The two girls were dressed alike and are similar in appearance.
Why? The day Lilly was killed, Lianne Mars was in a hotel room with Jake Kane. Celeste shows up and they have a row. Lianne claims she'll have a paternity test done if Celeste tries to contact Veronica again. We know all this already, right? Anyway, this signifies to Celeste that Lianne is certain that Veronica is Jake's daughter. Celeste's husband is cheating on her and her son is still infatuated with Veronica. She decides that the only way to secure her families future happiness and financial status is to eliminate Veronica.
She hires Clarence Weidman. Clarence is already on the payroll at Kane Industries and as such, tracing the payment is a lot harder.
For awhile now I've been thinking that Lilly's death was contingent on her secret. What if they're not connected at all? It's possible that Lilly's secret was some other silly school girl thing that she and Veronica could've laughed and giggled about later. I highly doubt she would spill the possibility of Veronica's paternity to her in such a light hearted manner.
Anyway, Lilly intercepts a message from Clarence saying for Veronica to meet him at the Kane estate. She goes in Veronica's place, thinking that she can receive whatever bait he's dangled to get her there. He kills her, not knowing that he's killed the wrong girl. Duncan comes home, finds his sister's dead body. Is horrified and blacks out.
Jake and Celeste arrive home and are equally horrified. Jake thinks Duncan killed Lilly and sets in motion a cover-up. Celeste can't reveal that she hired Clarence unless she wants to incriminate herself, so they both play along with the cover-up to cover their own bottoms.
I am delirious.
P.S - Will be half-here for some time now. Am having computer difficulties.