This dealer probably has a loyal following of a few who he deals with consistently. PBP's buyer probably being one. I wonder now how much he will continue his relationship with this guy. It probably depends on who's side of the story he believes, not on common sense.
The most logical thing for this guy to do would have been go on with the delivery of the firearm, with a warning to the purchaser that his policy was to only accept guns from another FFL.
It sounds like he really did not know the law, and is too stubborn to admit it and move on. From the rating of his business, it sounds like maybe his stubbornness and pride get in the way of a lot of his deals. Hopefully, he is man enough to realize his mistake, learn from it, and move on to be a better business man and representative of the firearms industry.