In an attempt to write a prose description of this event, use the third-person omniscient point of view and then the first person point of view, and consider how do these versions differ.
There are a lot of great responses here (the most relevant, IMHO, are aknowledging the connection to Greek dramatic tradition and the emphasis on reader imagination), but no one has mentioned the way it plays into Macbeth's consistent theme of examining reported action vs. true action.
We can find examples of this contrast all through the play--Macbeth's "is this a dagger which I see before me" (is there a real ghostly manifestation of the dagger?), his vision of Banquo (is Banquo's ghost real? Is Macbeth imagining him?), and the witches' description of Birnam Wood coming to Dunsinane (reported action that becomes true action --but in an unexpected, highly literal way). From the beginning, he trusts the witches report of their visions for the future, and Lady Macbeth trusts his report of their report.
Viewed as part of this theme, Shakespeare's decision to kill Duncan offstage allows the audience to maintain dual (and dueling) images of Macbeth -- just as Macbeth wants his innocent eye to be blinded to his hands' bloody work, the audience is shielded from watching Macbeth's violence firsthand (no pun intended). This identity split, between a brooding, hesitant, cautious Macbeth who does not act against nature until agents of the Devil himself incite him to it, and a violent, blood- and power-thirsty Macbeth, who "starts" in I.iii when the witches hit a nerve by calling him King, and whose hands actually murder Duncan, requires the participation of writer, actor, and audience to maintain a delicate balancing act.
One other reason might be that in order for Macbeth to be a tragic hero, we have to have some sympathy for him. It's a lot harder to maintain respect and sympathy for a character after he murders an innocent--there's a reason that Othellohas to end quickly after Othello realizes his terrible, murderous mistake.
I agree that having the murder of Duncan occur offstage allows the audience to imagine the bloody scene. What each one imagines will be different, but to each it will be horrible and unjustified. (I'm reminded of Poe's "The Pit and the Pendulum," where he never tells the reader exactly what is so horrific in that pit. Each of us, then, is allowed to imagine what is most horrible to us.) Seeing a bloody Duncan serves no purpose. We do not see Macbeth kill Duncan or, later, his guards, and that's wise.
All the answers given above are thoughtful and useful. I would only add that by not depicting the death of Duncan, Shakespeare allows us to use our imaginations, which can often be much more frightening and disturbing than seeing violent events taking place on stage. In modern films, violence can be depicted in all sorts of gory and highly credible detail; in the theaters of Shakespeare's time, violent acts presented on stage often ran the risk of seeming unbelievable.
Theaters in Shakespeare's era were often attacked by their opponents for inciting blameworthy passions, and perhaps overt depictions of violent death (particularly the killing of a good king, especially one from Scotland) would have provoked criticism. Many opponents of theaters did in fact argue that plays could stir up sedition, and Queen Elizabeth I was demonstrably upset by possible analogies drawn between herself and the deposed king in Shakespeare's Richard II. Interestingly, the death of Macbeth himself also occurs off-stage, and the same is true of numerous other deaths in Shakespeare's plays (Julius Caesar being one very notable exception!).
Historically, Greek drama kept violence off stage and out of sight. Acts of violence were narrated and described by the chorus in third person. Shakespeare broke with that tradition and brought actions such as Duncan's death closer to the stage by having actors come and go and react to the event rather than have a third person description of the violent event. So the main reason Shakespeare had Duncan murdered off-stage was that the form of tragedy required it. The bigger question is why did Shakespeare choose to break with traditional form and allow the actors to replace the chorus and report about the violent event themselves?
Let us consider what we gain from not having Duncan's death depicted. In Act II scene 1, we are given tremendous insights into the character of Lady Macbeth through how she reacts whilst her husband is away killing Duncan. As Duncan is but a minor character in the play, killed off after Act One and notable only for his naivety and goodness, it seems approprate that the play should focus on one of its major characters at the expense of showing a bloody scene, which is more than made up for by the death of Banquo and Macduff's son later on in the play.
Toanswer the question rather briefly, the murder of Duncan is almost redundant given the scene that precedes it with its phantasmagoria and bloody images. In addition, there are certainly a plethora of images of blood and mangled bodies that have been in the first act as well. Moreover, the visible presentation of the murder of Duncan may mitigate the effectiveness of Macbeth's soliloquy in which he perceives a dagger before him, as well as the foreboding words of Lady Macbeth, who speaks of owls shrieking and the "fatal bellman."
To answer this question regarding Shakespeare's Macbeth, you might want to consider it from the author's point of view: it's pure supposition on our part, but what would the play gain by watching Duncan murdered? Shakespeare has killed "heads of state" on the stage before. In Julius Caesar, a group of men "stab" Caesar on stage before the audience. Perhaps the idea of Macbeth, the valiant and heroic warrior in Duncan's army, as well as the King's loyal subject, cousin and friend, makes the act that much more terrible in the audience's imagination, and may well allow the audience to also more closely watch the transformation of a good man, to a frantic murderer, and then to a seasoned tyrant and guiltless sociopath. Often it is not only what you see that is effective in drama, but what you don't see—what you can only imagine. For me, the idea of Duncan waking suddenly to the pain of a stab wound and trying to process the confusion and then perhaps the understanding in the instant before he dies what has happened, makes the murder that much more horrific in my mind.
As for the remainder of the posting, please note that I can only answer one question per posting. Second, I cannot really write the assignment for you, but I can point out the differences between the two of point of view, and with the description above, you should be able to finish the rest by referring to the ideas described. Only you can decide how you feel when comparing the two, since it asks for your assessment and response. The most important thing to do is to understand the difference between first-person and third-person omniscient points of view.
First-person allows the audience or reader to hear someone's thoughts. Written in the first person, using "I," the character walks us through every action, every observation, and every conversation, as well as his/her responses, concerns and questions arising from any of these situations. First-person is defined as follows:
Narrator participates in action but sometimes has limited knowledge/vision.
Third-person omniscient is when the story is told from the third-person point of view, using "he," "she," "it," etc. However, "omniscient" means that the narrator knows what everyone is thinking regardless of where they are: even if a character is away from the main action, on the other side of the world. The third-person narrator...
...usually jumps around within the text, following one character for a few pages or chapters, and then switching to another character for a few pages, chapters, etc.
First-person narration would be especially effective, particularly if written from Macbeth's or Duncan's point of view. You could also write from one of the guard's point of view as he awakes to find his King dead, and himself (and the other guard) being blamed. Third-person omniscient narration will allow you to get into the minds of all those involved, jumping between the innocent and the guilty. The responses would vary depending upon how close a character is to the King—for instance, it would be interesting to climb into the heads of the King's sons, Malcolm and Donalbain who now believe they are next to be murdered.
Choosing which point of view to select at this point would depend on your personal preference.
You also have to remember the time that this play was taken place. During the 16's it was seen as wrong to have even pretended to kill the king in such a way as assassination, so by doing it on stage would result in questioning the play, whether it should be allowed to continue or stop. To think of plots to kill the king in the play would offend the real king during the time.