The Malbari Hound, is a playable character. Like other characters, it has an approval rating.
If the approval rating becomes low enough, the character will permanantly remove itself from the playable characters. The other viable option is to not obtain the Malbari Hound, either from it's intial quest to save it or by denying it from joining.
If you don't want to have the Malbari Hound in the current party, you can deselect it from the active party when the party selection list is enabled or visit a camp to remove all current active party members.