When did he write this email?
Anyway, my 2ct:
Rewriting code back to a stripped down FBA is possible, but you'd have to redo it from scratch, you wouldn't be allowed to use the old FBA code as reference. Unless it comes with its own license(eg. 68000 core), any code(even a simple copy paste from MAME) done by other FBA devs is licensed under the FBA license and can't be relicensed without permission. Considering that MAME YM2151 core is GPL now, if it's all done correctly, Koch would need to make the source code public.
And yeah, he'd still need permission from Dave, which he obviously didn't ask. And asking it after licensing to Koch doesn't count. Under normal circumstances I don't think Dave would mind it. But after all this drama he'd have a dilemma, either side with Barry or side with the rest of the FBA guys.