I still don't understand this, why was it lame? They asked you to kill a mass murdered and somebody that basically commited genocide.
They also asked you to kill mankind's savior, and someone who hasn't shown hostility for thousands of years. They didn't demand that Tiber Septim kill him, and they even allowed Tiber to have at least one dragon among his ranks during the conquest of Hammerfell.
I can understand them requesting you kill him out of mistrust and fear, but for them to completely turn their backs on you because you have no reason to believe he's a serious threat is completely different. It's not like you're refusing to kill dragons, or that you wouldn't kill him if he became hostile. It just makes the Blades look like they're more out for blood to commit dragon genocide now, than simply guarding against the threat the dragons pose. If the threat can be neutralized by making them peaceful, why kill?
I'd also point you to the Orcs... a race of lethal warriors who have an in-bred need to fight and battle, yet became a part of the Empire and have been living in relative peace once they united under Gortwog, who was willing to set aside his nature and attempt diplomacy. Granted, he got a big stompy robot to help back their position, but they've made good on their word (relatively speaking). If the dragons are honestly trying to change and be peaceful, as Paarthurnax shows is possible, why not give them a chance?