Mhhh, either upgraded or sealed.
In the one hand, upgrading him would mean he has more influence and thus there are more Malal chaos cultists.
Now, this would probably mean an increase on regular Malal servants and heartless, and while their servants are normally "ok", the same cannot be said about the heartless, and knowing the mentality of Chaos Gods, he doesn't care.
Now, most of his resources would be on screwing up with chaos, and a demon incursion of any kind is bad on its own, but I am not sure if heartless could spread from one world to another (demon/ork hybrid), oh, and that would probably also lead to some other 'everybody vs darkness' moments.
Still, more chaos.
On the other hand, sealing him away, will keep the temporary benefits that we had letting us prepare before Chaos starts doing what it was going to do from the start, which is bad.
Still, no more Malal nor more Heartless (unless somebody starts messing up with those dark crystals), and this is probably the most likely outcome, because of undivided Chaos.
We would probably need to invest more inventions and integration actions on making their way of life better and making a sence of unity and ecuality among all factions of The Bastion.
Which is our current route, only that more difficult 'cus Chaos.
Moral of the story?
Screw Chaos.
So yeah, even if everybody, including Chaos, joining the same side against a common treat sounds good and funny, I think that this has gone a little to far for what was basically crossover shenanigans.
[X] Sealed Away. The Four cooperate long enough to seal Malice away. Chaos Gods start nudging large quantities of Orks and similar threats towards you in 5 Turns. Xenos polities have a far higher chance of becoming hostile and/or Chaos corrupted.
BTW, isn't there a black hole or something that is where Malal got banished according to itehattsd?