Whether or not Holocaust denial is an excommunicable offense, he should not be allowed to remain a bishop unless the Catholic Church wants people to very reasonably attribute his views to the Catholic Church to some extent.
The point is, it branches him back into the apostolic sucession, and thus retrieves the people he ordained. He can still be punished by the pope for his other errors - before he could not. In fact, he has been instructed not to teach (I think).
You need to understand the apostolic sucession and how it works to understand the mechanics of this.
FAIL