1) After the Yeerks took his parents
C. Made him an Animorph.
As much as I'm in Marco's shoes a lot, I think I would have been more willing to give the kid a chance than he was at first. Besides, there's nothing else they can really do. Killing him makes them no better than the Yeerks really, and giving him to the Yeerks would go against everything they're fighting for.
2) If C, after he turned murderous traitor
A. Killed him
Only after everything got as bad as it did. At first, I would have done what they did, try to get him to stop, but once it was obvious that he was willing to kill as well, he forfeits any 'oh woe is me' factor he had before.
Obviously, keeping him around is not an option. Giving him the cube would probably lead to David giving morphing powers to thugs; Psychomorphs.
...That actually would have been a cool route to take the story for a bit, now that I think about it. The Animorphs would have had to deal with both Yeerks and a rouge group of their own.