HISTORY
This is a tale that started four generations ago with a family feud. Which ended with a trial of combat, where a PK got murdered after the duel and the enemy family got expelled from the lords lands (and went to ireland).
Three generations ago it continued with another feud where the PKs managed to prove wrongdoings by a baron in their county so their count also expelled that kin and household (which also went to ireland and met up with the other family).
Two generations there was lots of small sightings of the bad guys and some raids etc, which culminated in them burngin down parts of the PK's family's manor.
One generation ago those bad guys had helped Galeholt with his conquest so they now commanded assets again, they then plotted and sent people back to Logres and slayed the PK's count, on the high king road.
In the recent years, the event where Galeholt and Arthur makes peace happened. During this the PK's got Arthur to mention the murder to Galeholt and Galeholt ruled that for such a dastardly act they would no longer get his protection from any persecution of this but also because of their service to him he would not aid any campain versus his then former vassals. Thus my PKs couldn't do anything anyway.
Then comes Arthur's campain to Ireland and the creation of the Pale.

So at last my PK's could act against their enemies of so many generations. The murdered count's heir sends his bastard brother with a small army along with the PKs.

THE CURRENT EVENTS
After lots of drama they win a siege and then also a large battle against their foes. After the battle they have lots of prisoners which are released with the exception of 40 tied up members of the enemy families.
The descendant PK of the original feud, then gathers all those prisoners in a tent with hay and oil with the intention of burning it down, other PKs interfere and they have a heated argument.
During the argument a mercenary throws a torch at the tent and all in it die horribly.

THE DILEMMA
Most of the other players think that the PK should lose a lot of Honor for this, or be punished by his liege, or even punished by Arthur.

Now the PK in question has Vengence 18 and Cruel 17 coupled with a Hate for the family of 15, so it follows his history and his character. Before the battle he held a speech where he promised to kill all of the enemy kin unless they walked away and renounced their cause. The prisoners never formally surrendered, nor did anyone ask for any of the prisoners to yield.
In the argument the PK offered to instead have a duel to the death with each man in the tent after another "if that would make them feel better".

So what do you think?

Me I think that by the old think the kin share the guilt of the murder of the Count and all other crimes, and thus neither Liege nor Arthur would care about the actual killings. Since the family had plotted and murdered the count on the high king road. (I think that Arthur might have wanted there to be a court hearing etc so a lecture and an oath for future events but not enough to actually punish the knight).

But when it comes to the Honor passion, then I'm not so sure. Should that take a nosedive or not? I'm a bit torn.

I find the question of honor rather difficult to handle. But what I try to do nowadays when I find thing less than crystal clear, is that I ask myself "Is this something that I think a honorable person would do?". This often helps a lot, though it may not answer how much honor will be lost.

In this case, I would ask: "Would a truly honorable person burn a bunch of helpless prisoners of war to death?" I think not, whatever the reasons (which do not matter here, as Lancelot could explain). So I would take at least two points of honor, perhaps much more. Attacking an unarmed knight cost -1 Honor according to the rules; that rule could be used here.

And I hope he wasn't chivalric, because then he just broke his chivalric oath ...

Before the battle [the player-knight] held a speech where he promised to kill all of the enemy kin unless they walked away and renounced their cause. The prisoners never formally surrendered, nor did anyone ask for any of the prisoners to yield.

He gave his foes the opportunity to yield before the battle, and warned them of the consequences if they did not. In that, the player-knight is beyond reproach. Had he given them all swift clean deaths, that would have been honorable. Burning them alive is barbaric, however, and had he actually torched the tent himself or directly ordered the mercenary who did so, his Honor should suffer. Penalize his Honor by -1 simply to reflect the social consequences, and another -2 for the sheer extremity of his intent. If he did give the order, double the loss of Honor.