If he didn't update, then he would be unable to use the PlayStation Network, which was another advertised feature. You can't pick and choose, he paid for both.
I say all the power to him, and I hope other people follow in his tracks. If enough people continue to try and get their money back, perhaps Sony will add the feature back.
Not true at all dude... Purchase of a PS3 does not entitle the consumer the right to utilize the PSN. On the box it says:
Playstation Network
Sign up for FREE
Which means the consumer has the right to sign up, but you have to agree to its terms to use it. I'm pretty sure it was ammended before or during the update to reflect that one could not connect with the other OS option enabled, or something similar to that affect. Since I'm pretty sure part of the agreement stated that the terms were subject to change WITH OUT notice.
More to the point when you updates your system software you were told the other OS feature was being removed and that if you didn't apply the update you would not be able to connect to the PSN. So it's not a choice of either/or it is a choice of keeping a feature you may want to keep or not.
Also he may have been able to get away with suing the vendor, but the vendor doesn't know the agreements listed in the PS3 for its system and usage, so they naively gave him the money, if it went to court dude would have lost, unless the lawyers were idiots.
No where in the liscense and agreements of owning a PS3 is one entitled to using the PSN. Nor is it a feature that PS3 is compelled to give to its users. They could completely shut it down and no one could do a damn thing about it becuase its a privledge that PS allows to its consumers, not a right.