I really think he's the most underrated of the Shrek villains outside of Rumpelstiltskin even though a lot of people think he's not that great. He was treated mostly as an arrogant but dumb brute in Shrek 2 but actually was shown to be intimidating in Shrek 3 as the main antagonist. Unlike Farquaad or Rumpel, he was no coward either and actually tried to fight Shrek one on one at the end of 3 which also I think is what makes him underrated
I think the best idea for a redemption arc in Shrek 5 (if its revealed he survived the tower falling) is hes visited by the 5th villain either in the dungeon or working as a stable hand (as punishment for his actions in 3) where he is offered the chance to have his revenge on Shrek, to which he accepts
He basically becomes a bounty hunter for the 5th villain and is tasked with capturing Felicia in order to lure Shrek in, however after doing so Charming begins to regret his actions (a scene where Felicia complains about Shrek being an overbearing father and how he would never rescue her) which makes Charming remember the way Shrek saved Arthur, and even said to him "I'm not giving up mine" in reference to having his happily ever after.
A redeemed Charming brings Felicia back to Shrek much to the shock of both him Donkey and Fiona. They are wary of him at first until he explains his intentions and offers to help join them in stopping the 5th villain.
After the villain is defeated Arthur offers Charming to become a nobleman/swordsman/knight for him in Far Far Away but Charming declines and leaves to start a life in another land but promises to return to the swamp every now and then to visit Felicia and Shrek.
Not the longest idea but its what I had in mind. I think this would make him a more dimensional villain if the 5th movie took this route and might fix him in the eyes of fans that think hes the weakest of the Shrek villains. He would be better utilized than Tai Lung was in KFP4 and get more screen time. I tried to think of a way to work Rapunzel into this idea but couldn't really see a way to, and I'm not sure what would happen to the other villains in this plot line if they are all returning (because I CANNOT see the godmother, Farquaad or rumpel redeeming at all)