They should have dismissed her properly following correct procedures. However, it does seem unfair that she gets such a huge award. Ordinary people who fuck up badly at work don't walk away with £600k pay-offs.
Sharon Shoesmith ran a terrible department. She was not a social worker and doesn't seem to have taken much interest in social work - her background was in education.
Her reaction to poor Peter Connolly's death was appalling. She refused to take any blame, and tried to cover up the massive failings in her department, commissioning a report that was entirely misconceived. She should have been facing proper procedures for gross misconduct. Shame the council and the government fucked it up quite so badly.