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Magus living is canon. Lucca's letter is written as if he were alive, which is indicated by two things:
1. First and foremost, she refers to him as Janus, and since they never did that during the original Trigger journey, we can presume that not only did he live, but he kept in contact with them and eventually mellowed out a bit, becoming more like his Radical Dreamer version, Magil.
2. She also mentions that he might have already found Kid, which also suggests he is alive and still searching for Schala.
You have the option to kill Magus, but it is canon that he joins you. Think about it this way: why give the option at all if his death were canon? Surely if his death were canon it would make far more sense to not allow him to join you. It'd be like having General Leo from Final Fantasy VI join your party after he was killed.