You are right, this does get complex.
If the tenants are at fault for the damage, then you all can expect that it will be deducted from the security deposit. From what you wrote it doesn't sound like you all should be responsible. So that issue may end up in court, and I can see Dave's concern.
IMO, Charles gave notice and shouldn't be held responsible for any more rent. The landlord approved new tenant, so I would say the new tenant should pay Charles back the share of his security deposit. Dave has now become new tenant and he also needs to give proper notice before vacating.
Possible solution, get the issue of the damage resolved. If it is found that the original tenants are responsible, deduct Charles' share from the security deposit and send him the balance. If not found liable, don't deduct anything from it.
You may find this link interesting as well:
http://www.dca.state.ga.us/housing/H.../secsdeps.html

