The short answer is: politics. The longer one is that it wouldn't win any points among the public in the short term if this guy shut his yap, and would also allow this POS to get away (thereby avoiding the international reaction if he is killed, while still allowing the government to say "we tried.").
Words mean nothing, actions mean everything. I agree, just kill him and announce it afterwards. Then arrest everyone at the funeral, let the innocents go (all 4 of them) and keep the bagged terrorists (those that weren't shot while resisting, that is).
You're far kinder than I am. I would strafe it repeatedly and chase down those running away with attack helos.