What would you do with an Evil AI?

Some addtitional detail might be helpful. I get that the AI is not superintelligent (maybe genius level?) and not likely to go singlular.

As I just mentioned elsecomment, no superintelligence is yet known in the setting (or, at the very least, if any exists, it's doing an excellent job of hiding itself), and most "AIs" are roughly the equivalent of better NPCs in VR MMOs. (Their main economic effect is that any McJob whose tasks can be identified and laid out, has most likely been filled by such an AI, which was a significant part of what inspired a failed revolution, and so on.)

It's not clear if it can access and modify its source code, or if the Heroes can do the same: in this case they can easily rewrite its ethical routines and make it more manageable.

Plot-wise, there are some secretive groups on and near Earth who want to prevent colonization of the solar system from creating populations outside of their easy control; and so, as part of a concerted campaign to sabotage any such colonies, this AI was planted in a particular ship to kill off the crew, and to try to do so in such a way to discourage and dishearten whoever found the derelict vessel - and, if possible, kill them off, too. The setting's tech includes reading and writing signals in peripheral nerves; in VR, this allows for full-sensory immersion using just tech-collars instead of clumsy suits and gyrospheres; so the AI was able to both lock its victims inside sensoria of its choosing, and puppeteer their bodies to bring the rest of the crew into VR.

As something of a weapon of war, or an intelligence device, or whatever niche it would be best filed in, it would defeat most of its creators purposes if the AI could alter its own source code, which would run the risk of it altering its motivations. Due to the story so far, the AI is a purely software thing, and Our Heroes have a copy of its executable, if not necessarily its source code. Our Heroes also have source code for ordinary, non-evil AIs, for anything they might want to use AIs for. As best as I can figure so far, about the only thing that makes the evil AI of any more use than merely deleting it and installing a fresh, non-evil AI, would be if some use could be made of its evil nature... of having a piece of software programmed with something like the reverse of the first two of Asimov's Three Laws.

In a sense, it could be considered a software WMD; if it were released amongst the billions of McJob-filling robots on Earth, nevermind the military drone-infantry... well, there would be a /lot/ of death and suffering. If it got control of a Von Neumann factory, it might even turn into a full-fledged Saberhagenian Berserker... or it might not.

Perhaps keeping the thing's code tucked away in a filing cabinet might be roughly equivalent to keeping a bit of smallpox in P4 labs to experiment with?

It's hardware may have a strong upper limit on how intelligent it can be, and there might not be any way for even a superintelligence to escape from the box it is in. And not all AIs will be smart enough to foom or have access to their own code.

If for no other reason than I want to continue to play with the setting, and to use it to explore various ideas, I've assumed that there's some reason a simple AI-foom is infeasible. As a fully conscious, fully sapient AI would be able to try self-improving through any number of methods, this limitation is what led me to set up the rule that the AIs in the setting aren't fully sapient. One parallel I've used is that most AIs of the setting are merely expertly-trained systems with conversational AIs good enough to fool a human's extremely anthropomorphizing brain into thinking another person is there. I haven't needed to get any more specific than that before; one option might simply be to say that consciousness continues to be a hard, unsolved problem.

(And if somehow you posit that your AI cannot foom for some reason, than it would be silly to treat it as an AI in that sense. Treat it as a alien with goals vastly different from our own, but a similar intelligence level. (Like, say, the Babyeaters))

A good thought; I'll keep it in mind and see what results.