I don't know if there was hope that the Dominion would reform; my recollection was that the only thing explicitly stated was that they weren't to go into the Alpha quadrant/the wormhole. It didn't break up their empire, and they could go ahead and do whatever, provided they not break the treaty. At the very least their (future) conduct wasn't discussed.
It would suck for Odo, but there are millions of people in this world who would love to visit home but can't for political reasons (Iran, Cuba...).
I guess you could take it that the Dominion reformed themselves enough for the Federation to approve -- one hopes -- Odo's going back to the Great Link, although it certainly wouldn't be the first time the crew went rogue.
That was written poorly.