Does Malvolio's fate at the end of the play seem fair? Why do you think Shakespeare included him in the play at all?

Malvolio's fate does seem fair, because it was his own insistence on fighting that got him killed. Tybalt had no intention of fighting him, only Romeo and Romeo refused the challenge. Mercutio's embarrassment for Romeo's "cowardice" and need to constantly be fighting is what accelerated the fight and it's why he died. Shakespeare included him in the play though, for comedic relief through the first half and then to incite the punishment of banishment in the fight scene so that the ending could happen.