I maintain my earlier beliefs: the paladin's wrong not directly because of violation of code of conduct (depends on his god, IMO), but because he had all the evidence in the world to believe that the perp was not acting alone, evidence now wasted with the guy's death.
Now, about GM entrapment...
If this was entrapment, it was hamfisted and should have been wholly expected. Grim and gritty settings shouldn't be magically easier for paladins than for anyone else. Shining armor's not an easy effect when wallowing in filth.
It's also not a real entrapment. I ran a campaign where, after the party thwarted the villainous bard three times straight (first time, he didn't know them; second time, he didn't remember them - really ticked them off, too), the villain did something entirely villainous. While the party was out celebrating their victory, the villain quietly broke into the paladin's home, uncovered the paladin's journal, and read through it. He discovered the paladin had an oh-so-cutesy crush on a woman he'd grown up with, and was trying to wring out the courage to do more than the passive, unrequited love gambit. The paladin had written epic sonnets about how beautiful her eyes were, and had made sure that what little earnings he'd made wound up anonymously on her doorstep. The paladin waxed on and on about how, once the villain lay defeated, our hero would set aside his sword and retire with her. The villain than left the journal open on the beside, to the page he had torn from it, and set a trademark dagger over the book.
When the party found the poor woman, she said that as the bard read her the passages, the paladin's pure words had moved the villain to tears, even as he was cutting out her eyes.
At this point, the paladin was apoplectic. Who wouldn't be? He swore vengeance, asked for (and received) permission from his church to have an extended sabbatical to hunt down this vile fiend. The paladin invited his maimed lover to his stronghold, and set his cohort as her protector in his absence. He sent many messages to her, and all the gold he could spare.
Eventually, of course, he caught up with the bard. By this point, the paladin had sullied but not stained his honor, performing questionable but wholly understandable acts such as threatening one of the bard's accomplices. The bard congratulated the paladin on the journey, then pointed out that while the paladin had been so obsessed with vengeance, he'd ignored dozens of the bard's other operations (incidentally, the bard's motivation for ticking off the paladin was to distract him). Moreover, he pointed out to the paladin that the reason the beloved woman had not written any answering posts was simple: she had hanged herself mere days after the paladin's departure on his quest for vengeance. While the bard may have maimed her, it was the paladin's loving words followed by a callous departure in a time of grief that actually killed her. The paladin refused to believe that he would be responsible for her death in such an event, and reached for his holy avenger, only to find a longsword +2.
In this case, the paladin fell because he attempted to absolve himself of the consequences of his own actions. The paladin picked vengeance over protection, and refused to believe that he was wrong to do so. After all, killing evil is good, right?
It can be, of course. It can also be evil - I don't think anyone here really thinks that a Mafia don orders a rival whacked out of the goodness of his heart. It's simple pragmatism, and that's not the watchword of the heroes.
In all honesty, I don't think it's enough to fight evil, it's more important to protect good, and paladins especially have to take the big picture into account. Vindicator killed one man to save one girl, but by letting this vile, contemptible fiend live, he might have saved hundreds. It's not that he definitely would have or not, it's that he didn't even consider it, he didn't try.
Perfectly understandable, but it fits my definition of an unwillful breach anyday.
