Considering she's supposed to be intelligent, you would have thought, at the very least, queries the morality, if not the legality and ethics of killing schoolchildren (let alone those she killed before she arrived at the island). She's fully aware of what she's doing, so it's all on her own head. She certainly deserves to be punished far longer than three years (that ends up around 3 months for every kid).
Hopefully, she won't have a happy ending (preferably meet a nasty end - with her own poison needs would be nicely ironic). Whilst she may have "changed" for dubious reasons she will have to end up killing people again at some point. Even though she's changed, she's still an insufferable, nasty little bitch. I've got very little sympathy for her, especially as she was sadistic killing everyone.
And yes, killing Nano led to more people suffering - all because of Nana (no idea why Nano should forgive her - obviously he forgot how Nana taunted him before he fell, although I do hear he did beat the crap out of her as well)