The fact that this student left mid-term for personal reasons suggests to me that he is under strain. I don't know the details, obviously; it could be depression, anxiety, insecurity, family troubles... But suffering of this nature can have a dramatic effect on focus, concentration, enjoyment and motivation, mental stamina, and other cognitive attributes. Perhaps the fact that he's back means he's recovered somewhat, but these issues generally do not disappear overnight, and you can expect a resurgence if he finds himself under stress again.
I wish more people understood that that the academic mindset — the way of thinking that we cultivate in ourselves and others — is unavoidably cold, clinical, ambition-oriented, and alienating. We tend to objectify everything, and process everything either as a teleological system to be worked through or an analytical problem to be dissected and resolved. That mindset is something separate from intelligence; it's more a matter of socialization than aptitude. Some students take to it like ducks to water, others (often the more sensitive, intuitive students) can find it brutal and hostile. The project you reference was a fairly typical move in the inculcation of that mindset. You gave him a topic, a structure, a set of short-term goals to meet, and a potential reward in the possibility of a publication, and then sent him off to meet them on his own: to 'prove his metal', as it were. He couldn't rise to the task (unfortunately), so you've chalked him off as 'rebellious' and are wondering publicly whether you should bother investing any more effort in him.
As I said: a cold, clinical, ambition-oriented, and alienating way of looking at it.
If you decide to put more effort into this student, you should recognize that what he needs at this stage of his career is to build confidence and a sense of intellectual security. If he feels like a task is strictly performative — something he feels he has to do merely because it's expected of him — he'll likely feel judged/evaluated and lose self-confidence. The fact that he's asking questions and doing reading outside the assigned work means that he's looking for a way to connect to the project on an emotional level — to make it meaningful — and that urge needs to be accommodated and encouraged as much as it needs to be reined into the task at hand. I'm not suggesting you should be his counselor or best friend, but he needs a bit more personal, human guidance and interaction than most students, at least until he internalizes the academic worldview.
Not every professor is inclined to do this. Some are too busy, some don't like that kind of personal interactions with their students, some are such consummate academics that they've lost touch with that supportive, personal, non-analytical way of being. No worries... If you decide not to work further with this student, the best course for him would be if you explained directly that you and he are not a good fit emotionally, and recommend some other professor in your department who has a knack for mentoring or supportive guidance. Maybe even set up an introduction; that would be a kindness. Ultimately this student is going to have to sink or swim on his own, sure. But making the water a little warmer in the short term might help him out.