I think this case highlights a number of failures all round.
//He was released without charges, since there wasn't enough evidence? Surely waving a 30-inch knife and attempting to assault an arresting officer was evidence enough?//
You would have thought so. I couldnt possibly say why the charges were dropped, but for them to have been dropped at a case review stage indicates to me that the evidence was very shaky indeed. It is generally the case that the police and CPS take assault on a PC as very serious indeed and will bring any case possible to court. The additional use of a weapon would have compounded this.
However, because the charges had been dropped, there was no reason they could have held him or subjected him to a Court Order requiring hospital treatment. If there had been a history of mental health issues (which it appears to have been the case), the correct approach would have been to have him sectioned. Distinct lack of "joined up" thinking/acting here. The problem is, it seems to me that his psychosis was drug induced rather than as a result of mental inbalance which is why it is possible he has slipped through the system. No consolation to that poor man's widow though.
Given his psychosis was drug induced I agree he should have been charged with murder. It is entirely possible he was but the CPS accepted a plea to manslaughter on the grounds of diminshed responsibility. I imagine they would only have done this on receipt of psychiatric evidence and probably also an indication from the Judge as to the likely sentence. In the event the conviction basis has made no difference to the sentence which is an indefinite hospital order.