I think he handled Tevez okay. He took a hardline stance publicly and backtracked, but Tevez paid the price.. literally. The team clearly needed him in the second half and the decision to allow him back obviously paid off.
I think he's a good manager and he has a proven record of winning titles. He hasn't had much luck in the CL clearly but he's brought City two more trophies in the past 2 years than the team had in 30-40 before that and he's being rewarded for it. I am a little surprised at the duration of the deal, but obviously the Russian Federation's 6 year offer meant they had to probably tack at least 1 more year on to retain him.
I'd imagine that if the team doesn't make waves in next year's CL, he'll probably be shown the door. This will be another tough year but hopefully a trophy or two on the domestic side of things will allow for a better group in 2013. The buyout fee won't deter the Chairman.