Using PWM signal to decrease power of laser over time
I dont know your circuit but...
Do you effectively want to use an RC filter to reduce PWM fluxuations so that the laser sees an analog voltage which will translate to a power (presumably)? - that will avoid the pulsing of the laser, but I did believe that the pulsing at full voltage was neccersary in most laser drivers - please post a schematic... Anyway if you want this to be less of an issue if an RC filter is not for you you could increase the PWM frequency (google is your friend) on the arduino...

To have it turn of slowly if your using analog, the RC filter could possibly have large enough capacity to slow the laser turn off. It will also effect rise time so suitable values for R and C will need to be found to suit. Otherwise you could dial down the PWM gradually before hard power off in the arduino software, by initiating a loop which gradually reduces power with time.

Somewhere to start anyway :)