Did he ever realize it was a hoax?

It's likely that Will Durant (Ariel was his wife and co-author) knew perfectly well that Piltdown Man was a hoax by the time he died, but since it took decades to write the entire Story of Civilization several things from the earliest books were known to be inaccurate by the time he wrote the final volume. If he had lived another fifty years, he might have had time to go back and make revisions.