I'm curious what other people do. I helped Madenach on my first play-through, and he was like, "Thanks, but my guys are still gonna attack you on sight." My second and third play-throughs, I killed him. Thonar Silver-Blood at least arranged a pardon and gave me my stuff back. Granted, it was his crooked guards who arrested me and took my stuff in the first place, but it's more than Madenach would do for me.
As a side note, while in prison I got around the lack of decent weaponry by going werewolf on their asses. Good times.
Help any orc, he'll offer you access to orc fortress. Help the leader of the Forsworns, he won't even tell his people to leave you alone. Also Forsworns are a pain in the ass. The less they are, the better.
I've done both sides, but when siding with Madanach you get a pretty awesome sequence of his men sweeping through the city, killing everyone. I even use the wait function to make sure this happens during the day for more casualties.
I always help him escape prison and allow him to purify Markarth of the filth and corruption during the light of day. Then after some time after the escape, I go ahead and kill him and everyone else at his hideout at Druadach Redoubt. Both Forsworn and Silver-Blood are a blight on The Reach.