I think that pedophiles can be rehabilitated, but I do not believe that their urges will ever go away. They must learn how to control them and how to focus on other things. I think for priests this is probably particularly hard because they are confined to a set schedule and set rules that do not allow them to go out into the world and find new hobbies and interests that they can focus on. They also must interact with children on a consistent basis and their position gives them unfettered access to children, which makes the temptation more likely to remain.
Pedphiles can be rehabilitated, in the same sense that alcoholics can be rehabilitated. They need to learn how not to give into their urges and how not to act on thier desires and impulses. Perhaps this priest was already trying to do that, but was unsuccessful by hiding his problem.
No, I don't think pedophiles can be safely integrated into society, especially when the victim was significantly younger than the perpetrator and when the perpetrator was in a position of power. Pedophiles will continue to require supervision and treatment and it will never be completely safe to have them in communities with children.
Sexual attractions, such as pedophilia, can be extremely difficult to re-orient and reorientation is rarely completely successful. Sex offenders have one of the highest rates of recidivism among criminal classes and pedophiles should not be allowed to reintegrate into a community without stringent safeguards in place restricting their contact with children.