I guess it was a quick snap decision because he had to release something and it had to be decisive otherwise it would have falling harder and faster... but he decided at the time (and I don't believe the hardfork was his idea) that there would be a soft fork to omit the transaction and then a hardfork to reverse the dao investors... I believe the DAO should be held accountable, it can reap the rewards, why not the risks?  I think he felt that the whole DAO project was too big to let fail and burn the tokens because he knew the hacker wouldnt refund. At the time it was the only sensible thing to do, to not woudl otherwise put the both projects in jeopardy because no other dAPP fund raising would ever be trusted again and that is the core of the ethereum business model to achieve network affect. Just me guessing.

Anyways since then the attacker has threatened with legal action which puts the ball in Vitaliks court again. The smart thing would have been to just ask for a bounty in private and take a few million $ and run. But to try to go for the full amount and threaten that he will sue etc is a childish move imo and will backfire as Vitalik will surely fork so hacker gets nothing and then probably not have any issues legally.

I believe DAO will have an option of staying alive and again this is just me but if I were to do it I would give DAO investors the option to keep with the DAO tokens and keep the project alive at their will... obviously reducing supply and reducing the scope of the project financially. This will fall inline with short term expectations with the quality of code that has been written which had compromised the present value of the project. In the future we are sure the quality will increase as well as awareness of what can happen if you don't do proper code inspections and analysis of the possible code paths of the contracts. (recursion is like smart contracts 101, a code review would have caught it).