I notice that Rakish Audacity doesn't care if an ally next to you is incapacitated or not, but the default Sneak Attack rules do. So if you're standing next to an ally and you're both within 5ft of an enemy, you get Sneak Attack, but if that ally gets incapped it disqualifies you from normal Sneak Attack, but also disqualifies you from Rakish Audacity because your incapped ally still counts as a creature even though they are down. Is it in theme for the Swashbuckler to not stand over their friends and protect them?

The way Rakish Audacity works seems to encourage not being next to an ally so it is fine theme-wise. They are more one on one rogues. But as long as there is 5 feet between you and your ally, say on opposite sides of target your sneak attack still works. 

Quote from ThriKreenWarrior >>

The way Rakish Audacity works seems to encourage not being next to an ally so it is fine theme-wise. They are more one on one rogues. But as long as there is 5 feet between you and your ally, say on opposite sides of target your sneak attack still works. 

Yeah I took it to make them into one on one duelists that challenge their opponents to honorable single combat (Panache), but this niche case also seems to make them want to abandon their fallen comrades, which seems less thematic.

Could think of it as them drawing the opponents focus away from their fallen comrade to avoid a coup de grace 

they can circle around their opponent so they are next to the opponent but the swashbuckler is 5’ away from their ally and get their sneak attack. The opponent would be foolish to try and finish off the fallen comrade when the swashbuckler is hitting them hard from the other side. 

That's a good point. They also get Panache so they can draw fire away from their fallen comrade.

Origin of "Panache":

It's a reference to King Henry IV of France, who was a pleasure-loving and cynical military leader, famed for wearing a striking white plume in his helmet and for his war cry "Follow my white plume!" (French: "Ralliez-vous à mon panache blanc!").

There is nothing about this feat that compels you to do "honorable" combat. You're still a rogue, your entire theme revolves around not having to fight in a fair way. You're here to capitalize on all of your foes flaws, weaknesses and mishaps if you so choose.

As for this Rakish Audacity feature's intent in design, I think it was meant to make the ability distinct from the normal version of sneak attack by removing exactly what enables the normal sneak attack - having someone next to you and your enemy to distract them. You don't need others to distract your enemies for you anymore, you can just do it yourself, and to be able to do that you need...your space! You need to be able to execute your flamboyant, exaggerated moves. Tumble roll, dance, duck and dive... use the environment to your advantage like in giving you a kickstart from a low stair railing to shoot past your enemies...

It is rakish, and it's an audacity in itself!

The entire style of the Swashbuckler revolves around the

art of the blade, relying on speed, elegance, and charm in equal parts

and that your

fighting looks almost like a performance.

Nothing more, nothing less.