Was Lincoln right to limit the proclamation to those slaves living in rebellious states why or why not?

Answer 1

He was absolutely right to do because the edit was issued under his authority to suppress rebellion. He had no similar authority to make such a proclamation applying to areas that were not in rebellion at the time.

Regardless of how you may feel about the morality and desirability of such an act, the fact is that applying it only to those states which were rebelling was legal, and applying it to the non-rebellious slave states (Kentucky, Missouri, etc.) would not have been.

In practice it made little difference. Only about a quarter of the slaves in the US were outside "rebellious territories", and they were freed slightly more than two years later anyway by the Thirteenth Amendment. The real benefits to the US were:
1. Logistical. Slaves which came into the hands of Union forces no longer needed to be treated as "enemy contraband" and either held or returned to their masters; they were simply free citizens.
2. Political. Making the war explicitly about slavery made it much more difficult for anti-US elements in the UK and France (both of which had already outlawed slavery) to justify supporting the Confederacy, and effectively removed the (already slim) risk that those countries would decide to intervene in the conflict in any significant way.