you can't redeal because that gives every player the ability to "veto" every deal. all he has to do is grab the cards next to him. "oops, sorry everyone, redeal". Once a hand starts, virtually nothing triggers a redeal.
There are "standard" rules that we quote a lot around here, collected by Robert Ciaffone:
Robert's Rules of Poker. These are not the "official" rules, but rather a compendium of the way things are done in a lot of places, and a good resource if you're not sure of the best thing to do in a given situation.
By-the-book, if you peek another player's hand by accident, nobody's hand is dead, but you should expose the peeked hand under the "show one, show all principle" -- everyone gets equal access to information.
Now that might sound incredibly unfair to the player who did nothing wrong, but one overriding principle of live poker is "protect your hand". You are ultimately responsible for this, no matter what the dealer or another player does. In practice, this need never happen with rudimentary poker table procedures in place. True, this also impacts everyone in that hand and might put one player or another in a disadvantagous position, so encourage people to not screw up. The impact is unpredictable, though, so it's not really a disaster -- everyone besides the guy who didn't protect his hand is as likely to benefit as everyone else.
In a home game, we might have special rules for this situation, and house rules always override "standard" rules. In most games I play, the players simply trade cards and we play the hand. Killing the peeker's hand seems reasonable in a slightly more formal game, as well (although, we really should just work on proper dealing and players protecting their hand). The host just needs to set a house rule and be consistent.