No person should be punished for reacting that way to seeing a human being sawed in half by gunfire. Anyone who is not disturbed by that is either a die-hard veteran or a nutcase. As someone mentioned, its not exactly like the reaction is voluntary.
The fact that he had gone through basic training is irrelevant. Unless the Army has taken up some very strange training methods, you are never actually expossed to death in basic training, or in any other training for that matter. Learning how to fire a weapon and learning how to deal with the brutalitty of war are completely different things. Anyone can be trained to fire a gun. Not everyone can be trained to partake (or witness, whatever) in the destruction of human life without flinching. In fact, I very much doubt that training will help you in that regard. You can either handle it or you can't. No way to find out until it happens, and by then its too late. Sure, if you've been fighting in the Army for 20 years and have seen war, then you can probably deal with it, but its unreasonable to expect fresh recruits to be able to go through war without the occasional panic attack.
And anyway, its irrelevant. Obviously, at the time no one's life was depending on this guy. He wasn't providing covering-fire. His base wasn't under attack. He wasn't in a situation where his panic-attack would have made a difference. Therefore, its stupid to punish him without regards to the specific damage cause by his "cowardice", which was none.