I think firing the dealer would be just a tad excessive. He clearly made a mistake and should have been more aware of what was going on, but he is still human as well. And the root cause of this whole issue is unprotected cards which is one of the top basic rules in poker; protect your cards.
And for the sake of technicality, straight from Robert's Rules of Poker:
"2. You must protect your own hand at all times. Your cards may be protected with your hands, a chip, or other object placed on top of them.
If you fail to protect your hand, you will have no redress if it becomes fouled or the dealer accidentally kills it."
The italics and underline are mine, not Robert's.

So in summary (IMO):
[x] whole situation sucks
[x] players are responsible for protecting their cards
[x] this situation was the players fault
[ ] this situation was the dealers fault
[x] TD performed due diligence for fairness of the game
[x] dealers make mistakes and are human
[ ] dealer should be fired
[ ] she deserves more than the end result