How is Satan shown to have qualities of an epic hero... which lines in Book I and II highlight his bravery, complacency, liberalism, leadership and valor?
In Book III, after the introduction of Adam I began feeling that Satan from then onwards acts as only a sinister force to the new protagonist, Adam.
It has been much commented upon that Satan actually could be viewed as the "hero" of this great epic classic, as God appears to be boring and uninteresting in comparison. We are given much more insight into Satan's feelings, emotions and motives for doing what he does, which arguably makes him a far more interesting character.
Milton expresses many of his ideals through Satan (such as the necessary knowledge of Good and Evil [Areopagitica] and speaking out against tyranny [The Tenure of Kings and Magistrates]). But while Satan is a proponent of many of the poet's ideals, he has corrupted them. The angel takes Milton's ideas out of context and abuses them to achieve his own inglorious ends. Abdiel, who can be seen as another representation of Milton, speaks of the hypocrisy of Satan. He makes the distinction between rebellion against a human tyrant and rebellion against a benevolent God (the latter being generous and peaceful).
Satan is most certainly the "epic hero" of the poem. He is the only character to fit the heroic mold as set forth by Homer and Vergil. Satan has an epic flaw (pride), sets forth on an difficult journey (from Hell to Earth), and has a definite goal in mind (to undermine God). He is also the conventional warrior-hero that we see in the ancient epics. And while the angel may be evil, his deeds ultimately lead to good, when the Son redeems mankind and leads them to dwell in Heaven. I would definitely argue as Blake did when he said that Milton was "a true poet and of the Devil's party without knowing it".
On one level he shows sympathy, and it has been said that Milton has made him the true "winner" in the battle between good and evil. However, a close reading will reveal how Milton, with great humor, makes fun of Satan every step of the way.