That's awful, poor thing. But there is no reason at all that once it's for sure healed that he can't be taught to ride with a halter, or a rope hackamore, or something that doesn't go in his mouth. I don't know what your plans for him were, but I don't think that is something that would make him only pasture sound. It's ultimately up to you, but seeing what he looked like when you got him, and how much better he looks now, I wouldn't let this knock him out of the game. He has too much potential to become a pasture ornament. I'm sure if you devoted the time and energy to it, you could still use him, if nothing else, that as a pleasure/trail horse. Good luck!
"Keep a leg on each side and your mind in the middle"