I let him atone for his actions by helping the Inquisition, but giving him to the Wardens after.
Its really the most "just" judgement in my view. He was already going to the Warden's before the real Blackwall died, and he had a lot of people killed, that's not exactly something you can walk away from. I say let him help the Inquisition, and then give him to the Taint. He's not exactly young, so its not like the Taint will cut his life much shorter anyway. Odds are he would die of old age (back then, people pretty much died at 50) or battle before his Calling anyway.
Plus, it is the option that gets the most approval from him (I think). He actually wants to become a Warden. He doesn't want to just be "set free". He wants to know he can do something to atone for his men. I gave it to him. Serve the Inquisition at the Inquisitor's side, then take the Joining and serve as a Grey Warden.