I agree with Crazed in that this guy is a huge risk to society -- more so than most first degree murderers. Even if he has schizophrenia and takes medication that helps him to some extent, I don't think he should be let free.
I definitely agree with that part. While I think it seems unfortunate and sad that this seems like the best thing to do, it also seems like it'd be a greater wrong to let him be free.
I think it depends if he's treatable or not. It's fully possible for an otherwise normal person to have a psychotic break, if they aren't taking proper medication.
That happened to my friend's husband, for example. Long story (that I've already posted here) short, he wasn't getting the right medication, had a break, tried to kill his ex-girlfriend (mistress?), ended up getting killed by the police.
It's a very unfortunate situation, but before the doctors screwed up he was living a perfectly normal life.