Galvanized will eventually rust out, but it could last a long time. If you did want to change it, you could replace it with a brass nipple, or screw on a desanko fitting that would allow you to attach a tubular drain. If you really do need the offset, you could instead install an elbow on that new brass nipple first.
Adding teflon tape to the compression fitting is almost certainly the cause of the leak...it never should be used on a compression fitting. Tape or pipe dope are required on threaded tapered pipe connections, not straight threaded ones as used for compression fittings. If the shutoffs aren't 1/4-turn ones, it wouldn't hurt to change them since you have good access now.