I think that having Harry obliviate is the worst punishment that Severus could inflect on Harry. It doesn't fix what was wrong, and now Harry lives with the knowledge that Severus would have never been able to forgive him. This will all have to come out someday, and it will be no better then than it is now. Also it was the easy way out for both of them. No work was required.
Very well written. I really liked it.