The Confederate states should not have been readmitted to the union. They should have ceased to exist. They forfeited their sovereignty by rebelling. The territory should have devolved to the federal government and been administered by it indefinitely.
Maybe in a few decades, after the slaveholding class was long dead, you could have formed some NEW states out of that region. You know, Grantland, Shermania, that kind of thing.
Possibly. They did of course break Virginia into two, though carving new states out of other Unionist areas would've been a trade off against leaving the rump even more full of traitors.