Why was the decision the right one? First, this action by the terrorists is not the first nor it will be the last in this area of Africa. That is why you just do not negotiate with terrorists. The future amount of casualties as a direct result of negotiations might exceed the unfortunate amount of casualties in this operation.
Second, one must understand the more macro vision of Algeria; what pushed many of these terrorists south into northern Mali was the fight the Algerian authorities preformed in the past against these forces in southern Algeria. The Algerian citizens and the foreign companies that want to use Algeria's resources to promote growth in that country need to get a clear and decisive message "We will not tolerate these types of acts on our soil". This is important for the region as well because the terrorists will find no real urban populated areas to move too. The only other area they can move into is the southern part of Libya but that will not have major consequences as it has little populations or cities in that region.
The biggest problem Western counties have now is to show that they are committed to root out this cancer till the last drop of blood. It is already difficult for the French to show lasting commitment and to recruit other African nations to the fight. However, the foreign promise of capital is greater than any nationalistic priorities and I think eventually more nations will join the fight. Other Western European countries will feel obligated to join the fight but will probably only do it logistically but without real troop commitment which will make the French feel exactly how the USA felt in the beginning of the Afghanistan war.
Funny how things turn out