I think that the Chief should become the next Diadact type character, taking over the mantle, or do as the OP said and dissapate into legend. However, seeing him die in battle would not be so bad. Especially if he is at peace. When has he ever been content with himself, knowing he has done his duty to mankind?
I think that it is sort of sad that his mental state has deteriorated to the point where he will not stand back and look at his accomplishments and feats and be happy. Maybe, they could pull a stunt where you train the next Spartan, after Halo 6. Make that Halo 7, and not so much of a competitive game. Maybe only single player. When we know, for sure that this next Spartan is ready to protect everyone that John used to, I will be happy. But only then.
By the way, everyone who says that is death is cliche, his dissapearance or what have you will be no matter what. By the time Halo 6 comes out, we will have imagined almost every single possibility for him. Just sayin.