If Palpatine believed being known in public by his birth name rather than his Sith title is more beneficial, then why don't the same misgivings apply to Anakin being publicly known as Darth Vader? Also, would it not have been better for friend and foe alike to know who he truly is? To let the citizens know that the poster boy of the Republic and the Clone Wars is the only one to have seen through the lies of the Jedi Order, and led the purge of the traitors as the champion of the New Order? To let the surviving Jedi know that the Chosen One of prophecy has fallen to darkness, and that all hope is well and truly lost? Perhaps it can even draw Obi-Wan and Yoda out of hiding to finish what they thought they succeeded in doing.

There seems to be plenty of benefits and strategic value in continuing with the Anakin Skywalker identity. As to the problem of him being in a suit, Palpatine can easily give the excuse that he almost died defending Palpatine in the same attack that disfigured him.

I had read that Palpatine was dissatisfied with how Vader turned out as a result of the permanent damage incurred at Mustafar - this shows that Palpatine did not quite anticipate this transformation. If that's so, Palpatine was probably expecting Vader to serve him in his original form - there would be no way of hiding his identity as Anakin Skywalker forever in that preferred scenario. So is there any key reason for hiding Vader's identity?

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I don't think it's explicitly mentioned in any source why Palpatine decided not to publicly connect Vader to Anakin. However, it's not difficult to make an educated guess.

I've explained in another answer why Palpatine hid his Sith identity from the public: Palpatine's story that the Jedi had attempted to take over the Republic depended greatly on the public perception that Palpatine was an old man viciously attacked and deformed by the Jedi attempting to seize power. Palpatine's image as a kindly old politician would conflict with his image as a powerful but evil Sith Lord. Furthermore, Palpatine was most effective as a politician rather than an overt combatant anyway. There was no benefit to revealing his Sith identity but there was a huge disadvantage.

The same is not true of Anakin/Vader, though. Anakin was a well known and popular hero of the Republic during the Clone Wars. The Empire even preserved Anakin's image after his "death", claiming that Anakin had died defending Jedi children against "Vader's" 501st in the Jedi Temple. On the other hand, Vader is an instrument of terror:

It was that genuflecting obedience, the steadfast devotion to execute whatever task the Emperor assigned, that had given rise to so many rumors about Vader: that he was a counterpart to the Confederacy’s General Grievous the Emperor had been holding in reserve; that he was an augmented human or near-human who had been trained or had trained himself in the ancient dark arts of the Sith; that he was nothing more than a monster fashioned in some clandestine laboratory. Many believed that the Emperor’s willingness to grant so much authority to such a being heralded the shape of things to come, for it was beyond dispute that Vader was the Empire’s first terror weapon.

- Tarkin, p. 73

Just as Palpatine's Sith identity conflicted with his public image as a kindly old politician, so too would Anakin's heroic Clone Wars image conflict with Vader's image as an instrument of terror. Thus, Anakin had to remain publicly separate from Vader.

Furthermore, tying Anakin to Vader as you suggest would invite questions about what happened to Palpatine when the Jedi "attempted to take over", and why Anakin/Vader did what he did. But Palpatine needed to avoid any questions about that incident to make sure no one discovered what really happened:

There were many stories about what had occurred that day in the chancellor’s office. The official explanation was that members of the Jedi Order had turned up to arrest Supreme Chancellor Palpatine, and a ferocious duel had ensued. The matter of precisely how the Jedi had been killed or the Emperor’s face deformed had never been settled to everyone’s satisfaction, and so Tarkin had his private thoughts about the Emperor, as well. That he and Vader were kindred spirits suggested that both of them might be Sith.

- Tarkin, p. 77

As for your question about how Anakin/Vader would have served Palpatine in his original form (no transformation into the suit): while it's always difficult to guess what would have happened in a hypothetical, I'd imagine Vader would have been used less as a terror weapon and more as a righteous former Jedi still attempting to restore order after the Republic was torn apart by the Clone Wars and the Jedi. The Empire's terror weapons would have instead been the stormtroopers, Death Star(s), etc.

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    The official explanation for Anakin is what irks me. If maintaining Palpatine's good guy image is paramount, then why is it ok to "claiming that Anakin had died defending Jedi children against 'Vader's' 501st in the Jedi Temple"? The Jedi are supposed to be bad. The Empire is supposed to be good and reborn from a corrupted Republic. This explanation for Anakin's fate goes against both intended messages. It seems more in line with the agenda to say that "only Anakin remained good but was betrayed by his compatriots. The Jedi did this to Palpatine, but Anakin suffered more protecting Palpatine." Commented Sep 29, 2015 at 2:50
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    @thegreatjedi The explanation of Anakin's death is indeed a bit troublesome. As I noted in the linked answer, it may not be the Empire's official story since it portrays the clones in a bad light. But that's the only explicit explanation I could find. It is only pseudo-canon -- it comes from a Legends book but it was written by the author of the Episode III novelization, so it may be what Lucas intended. If nothing else, you can always assume that the circumstances behind Anakin's apparent death "had never been settled to everyone’s satisfaction", the same as the incident with Palpatine.
    – Null
    Commented Sep 29, 2015 at 3:08

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