This doesn't feel like it's a major sexual harassment case in the making but if it is then the damage has already been done and sacking someone can't remove that liability.

I hope I'd also look at the cost and difficulty of recruiting decent developers, the opportunity to possibly salvage the PR situation (which I think a constructive approach might get us, unlike sacking someone) and the fact that there seems to be genuine remorse and that the individual in question seems like a reasonable guy who did an unreasonable thing rather than some arsehole.