Hank knows Walt is Heisenberg, but there's probably zero chance he could prove it beyond a reasonable doubt. Heck, even if he arrested Walt in the garage, he probably doesn't have enough evidence to charge him with anything at this point. He'd be held for questioning and released. All the while, questions would be raised about Hank's level of knowledge, him bringing Walt to the station and along on surveillance operations, Hank's unwarranted use of the tracking devices, etc. Plus, who is going to believe the mild-mannered, cancer-stricken school teacher could be capable of such acts?
If evidence gets tossed because you didn't have a warrant, fruit of the poisoned tree, yada yada... I've watched enough arguments between Lenny Briscoe and Jack McCoy to know that you'll often only get one shot at these things.
If Hank got to Jesse or Skylar, maybe he could flip them. Even then, both are highly complicit in Walt's activities and could be unreliable and uncooperative witnesses. Who knows if Hank has even connected Jesse to Walt. It would take time to build a case and time is something Hank doesn't have.
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