Wouldn't it be logical to expect something worse than "loose house arrest"
for the man, the head of a country's nuclear program, who had established a
network that shared it's nuclear secrets with other countries?

It's suspected that Musharraf and everyone else in contact with that program
was involved in this 'network'.

Excerpt from previous post.

It is also unclear whether Dr. Khan sold the Iranians a complete
Chinese-made bomb design similar to the one Libya turned over to the United
States when it gave up its weapons program. Questions about other copies of
the bomb design have been met with silence, in Iran and in Pakistan.
"Frankly, I don't know whether he has passed these bomb designs to others,"
Mr. Musharraf said. Even under a loose form of house arrest for the past two
years, he said, Dr. Khan "sometimes has been hiding the facts.

Surely.