"He is generous with failures." is the most natural.

They have different meanings. He is generous with failures = He gives failures generously with other people. Compare it to 'He us generous with money' and you can see this. This is strange and not very natural. He is generous to failures / He is generous with failures = He gives (something - time? money?) to people who are failures. Compare it to 'He is generous to/with his nieces and nephews' and you can see this. A failure can be a person who is not successful. He is generous about failures = I can't imagine a meaning for this. He is generous in failure (not failures) = He is generous in situations where he has failed. The prepositions completely change the meaning. What exactly would you like to say?

It depends what you mean. If you're talking about a teacher who dishes out 'fail' results generously, I'd say he's "generous with failures". But if you're talking about someone who gives out money or gifts in spite of his own personal financial setbacks, then I'd say he's "generous in failures" but to improve clarity (unless minimising words is a massive goal) it should be changed to "generous in spite of failures".