BLAKE: Oh, they did a memory erase on me, set up a show trial, had me confess, made me explain that I had been misled, that my political ideas were mistaken. Enough people believed me. The whole resistance movement collapsed. After that the Federation kept me around as a, a reformed character, a sort of ideal model citizen exhibit. Of course, I didn't know that at the time. No, it's only since almost exactly the same thing has happened again that the memory erase has begun to fade and I can remember.
So, if it *was* the repeat of the massacre that broke down the memory-blocks, then it's possible that keeping Blake around as a 'reformed' rebel wouldn't, in practise, work. The conflict between the artificially implanted belief that his ideals were misguided, and the evidence all around him that they *weren't*, might have undone the conditioning. If that were true, it would be safer to take away all memories of being a rebel, therefor reducing the conflict.
In the latter case, they *could* serve as hostages for his continued good behavior, but in the former, he would be an awe-inspiring example of the high cost of rebellion and therefore an effective deterrent.
In TWB, the Federation seems to be a lot more subtle in its oppression than it becomes later, or perhaps that's merely an illusion caused by TWB being set on Earth. Memory erase is officially banned (according to Veron), suppressants are a secret, serious criminals are deported rather than executed. A fiction that relatives or associates of resisters are allowed to leave or are deported from Earth rather than killed would fit in with that.
To the wider population of the domes, Blake was seen to recant his crimes, and is now living quietly in the Dome. They will never get a chance to meet him in person, so they don't know he now has no memories of his rebellion. Should the Federation need him again, he can always be re-mind-fucked.
To his closer associates, the people who knew him before and any resisters who weren't captured when Blake was, he's an object lesson of a different kind--try and resist the Federation, and this is what will happen to you. The idea of having your memories and personality so profoundly tampered with would be fairly frightening.
-(Y)
love Anna