"Nothing is more heartbreaking than realizing that a worker who is trying his hardest can’t cut it."

So true. I've had to fire a few people that met that criteria and it's really difficult to do.

In a startup situation, it might be advantageous to discontinue the full-time relationship but allow them to continue working part-time at their leisure (or according to some schedule) in exchange for continuing to vest their equity, but no cash.