The Founders were smart enough to design whole species with genetic engineering but they can't develop a cure for a virus?
It easily could have taken the founders hundreds of generations in the lab and centuries of effort to create the vorta and the jem'hadar, with lot's of blind alleys and failures along the way. Given enough time on their own the founder just might have developed an independent cure, if the disease gave them the time.
I do sometimes wonder if it was the founders who actual created the vorta and the jem'hadar (and maybe other species), the founders use other species as their workers, more likely some other servant race did the creating for them. The less than honest founders then took the credit.
So the Federation council officially refused to end a genocide that their own citizens have committed?
TNG did the same. With Picard being criticised for not taking a chance to commit genocide against the Borg in "I Borg"
The difference there is that Geordi's computer virus wouldn't have "genocided" the Borg to death, it simply would have cause the collective to disintegrate turning the trillions of drones into individuals again.
While many would likely have died subsequently, the captured multitudes would have been freed.