Blackwall is one of the most interesting conundrums in companion relations that Bioware has given us.
His initial grumpy demeanor makes it hard to get to know him until after you find out his big secret so the player may be less invested in his character at that point.
and:
Murder of children for coin - the mom in me wants to gut the ******* on principle. And then he runs and leaves his men to pay for his crime. Does not really compare to Sten (temporary insanity/ extreme fear response after a lifetime of Qunari brainwashing) or Zevran (who had no choice in becoming an assassin - even if he is not remorseful about it), or even Anders (possessed and nuts) who I always execute. Even Fenris' uncompromising hatred of all mages is rooted in the trauma of his own slavery. Murder for coin, strictly for personal gain is about as bad as it gets. Even Zev who is quite happy with being an assassin (as long as his life is no longer dictated by the Crows) is bothered by the events in the Denerim Alienage (orphanage and Tevinter slavers).
However, at the point that he joins the Inquisition he is no longer the man he was and has been attempting to atone for his crimes. And he does own up to his crime and prevents the execution of another when he could have continued living the lie.
So, yes he really does deserve execution, but maybe not given Cole's take on his redemptive arc (I do love Cole for his insights). So thus far, practical Lavellan has spared him because she needed him for the Inquisition, compassionate Lavellan has spared him but only to join the Grey Wardens when Corypheus is dead so he can give truth to his lies - and because it is a slow form of execution.
My difficulty comes in who to romance him with (I had planned on doing all the romances except Sera's - who just doesn't seem mature enough for a real romance). Before game release I had planned on romancing him with a naïve Qunari mage who was drawn in by the mystique of the Grey Wardens and who would accept his eventual calling as part of her maturing into the leader she needed to be. However, I'm not sure she fits him now, maybe if I still make him join the Grey Wardens this could work. The other option is my reckless and rather mercenary carta dwarf archer who I had planned for Bull. She would probably take Rainier's secret in stride (I'm sure she has done some pretty bad things in service to the Carta) but I'm not sure she would get along with him very well, he is a bit idealistic for her. Bull's rather practical approach with his underlying kindness may still be the better redemptive arc for her.
I do enjoy characters who provoke thought and give our PC's an opportunity to make very different choices.