We all know protocol isn't Obama's forte, but as Commander in Chief, it seems to me a salute would be pretty much mandatory.
Actually, how he responds is entirely optional. The military is required to salute him as CinC but there is no rule that he responds in any particular way or at all.
The service member, however, must render and hold the salute until the Prez returns it or passes by, at which point he/she drops it.
I believe Reagan was the first president to return a salute and it was kind of a to do when he did. President Eisenhower, a former five star general, never returned a salute.
It is more of a courtesy/sign of respect if the President salutes back but he is under no obligation to do so.
I think it kind of looks funny for a civilian that has never served in the military to salute. They too often don't have it down right or they do it sloppy.
But, I have seen sloppy salutes by the military as well (all you old SF troopers know whut I'm talking about!) FWIW, I've never seen anything but professionalism by the units that are engaged in protocol missions, like the Marine guards or the 3rd Infantry Regiment (The Old Guard) that guards the Tomb of the Unknown Soldier and also provides ceremonial support.