SPOILERS
I couldn't bring myself to kill him, honestly
I didn't find it necessary either. If I were up against a dragon, I'd want to have one on my side that could give me "inside" advice and knowledge that no other might have. That's just from my roleplay perspective. I also like meditating with him so my shouts are stronger. Killing him unlocks more Blades quests, but I'm fine without them for right now. I might do it in a future playthrough when I'm desperate for new quests. Though I do think it'll be hard for me to bring myself to do it...the mountain will be lonely without him.
(Again, this is from my roleplay perspective ^_^) I used to really like the Blades, but when they told me to kill him I found them extremely reckless and dumb. Sure, he's a dragon (oh no!) but he's changed with time and killing him would be hurting myself in a way, I think. If the Blades were smart, they'd want him to stay alive to gather more information as a way to get closer to the main goal.