I think many people will be annoyed because both of James' killers were jailed for a long length of time. yet, one has re-offended and ended up back in prison, so it has neither punished (otherwise he wouldn't want to return) or rehabilitated (otherwise he wouldn't have committed a crime again).
Disagree 100% with what you have posted. Imprisonment is about both retribution and rehabilitation. Whether you agree or disagree with the decision of the parole board, Venables and Thompson were locked up and denied their liberty for a period of 8 years from 1993-2001. During this time they were both significantly rehabilitated and for all we know Robert Thompson may have been as fully rehabilitated as possible and will never commit a crime again.
With regards Venables whilst it is very upsetting / worrying that he was convicted of child pornography offences and there are RUMOURS of drug abuse, alcohol abuse, breach of parole conditions; to say that he has not been rehabilitated at all is simply not true.
I am certainly not defending him or his actions but given that when he was released in 2001 some people viewed him as the devil incarnate who was born evil and it was only a matter of time before he would kill again, the fact that he was at liberty for 9 years shows that to a certain degree he was successfully rehabilitated. I'm certainly not defending the crimes he did commit, but the fact (as far as is known) he has not personally abused or murdered again shows an element of rehabilitation.