Since I am role playing, and I see my band of characters as 'do-gooders', I was feeling pity on Scabben and was going to let him live, since he seemed sincere and was trying to find a cure.Though, since he seemed to also be the cause and he just went off the 'deep end' (at the end of his dialogue), we had a change of heart and did him him.
I doubt whether killing him or not has any bearing on further game play (except of course if someone else in your party gets that quest again ... then it would be nice to have him around).
Tools for your Wizardry(r) toolkit