For those asking, Traya Sutton and the orphanage are shown in the dossier as Red Tornado is reliving his past.
Red still has a relationship with his daughter, but the trauma of being destroyed and his identity subverted or his humanity wiped — which happens often in the comics, followed by an arduous heartwrending path to recovery that is shown to be very hard on all involved — was a lot for Kathy to go through over and over again, with no one to blame. So Tornado stepped back, to spare her.
The comic does make clear this is far from the end, and there are many paths and possibilities to reconciliation. I think it’s also okay for families to take many different shapes beyond the traditional nuclear one, and still for everyone to love one another.
What the future holds for them, we shall see…