Yep, he looks like he's on the road to recovery! He probably had fin rot from the lack of clean water and that's why there's not much of them left (yep, he's a male though). That's a common thing when their water's not changed. Melafix and Pimafix along with clean water usually fixes them right up when that happens, but obviously whatever you treated him with for fungus did the trick as well (that's what fin rot is ~ a fungus). Good job!
If he's getting along fine with everyone in the tank where he is, I'd leave him in there. It'd be good for him mentally I think, so long as he's comfortable with it. Keep an eye on him to make sure that the other fish aren't nipping at his fins, especially after they grow back in a bit more. And watch for him getting aggressive as well ~ that's when he might need his own space. But every betta's different and he very well may love being in with other fish.
How long did your neighbors have him? Do you know? Bettas are usually about four or six months old when they're in the pet stores and they only live about two years or so. The mistreatment he got from the neighbors may shorten that a bit, but your good care now will probably counteract that somewhat. When they get older they seem to get more mellow, so he might not ever get back to being really aggressive.
The things you're feeding him ~ are they floating things? Bettas are top feeders, so maybe some floating pellets would make him stir up off the bottom more. I like Hikari fish foods and my bettas LOVE their floating pellets once they get used to them (have a couple of fish from a show breeder in New Jersey and he apparently fed them on live foods because it took a week or two to get them used to the floating pellets).