Maxperson
Morkus from Orkus
Regarding the second discussion about the morality of mercy-killing the character I will say that I don't see it as an evil act. However, I don't want to step into that argument. Instead, I will simply point out that if the party does decide to mercy kill the character and the DM decides that the deities of that world consider it evil then the paladin still shouldn't lose his/her powers because alignment is not supposed to be a single act, but an overall trend.
If it's not a mercy, and it isn't since the PC can recover 100%, then it can't be a mercy killing. Mercy killings are for when the situation is hopeless.