You are 100% correct, morally.
I think the issue others are talking about is the legal sense that the bass wasn't brand new so the original purchase price wouldn't be considered when talking about "damages".
Morally, I would say that he should return the customers money, call fender.. have a replacement body ordered in the exact color... and pay to have an authorized dealer or tech do the swap. At that point the customer is exactly where they started and they have an extra body for their troubles. Have a better tech rout the old body for a soapbar, hit up warmoth for a neck and go ebay shopping for hardware/pups... and youve got another bass. Not a bad result.
Heres the issue... morally is not the usual result. Realistically if he can get all of his money back and have the tech purchase him a larger bridge pup AND pay somebody else to fix the botched job.... AND then throw in a half dozen sets of strings and maybe a nice strap... I'd call that a win.
We all want to call the big boxes evil and we all want to support mom and pop... but sadly its mom and pop that can be the worst when it comes to issues like this. There's no corporate hierarchy to lean on and no slew of number/emails to pester. Small claims court could easily decide in the customers favor... and then never be able to have him actually collect.
So yea, morally you're 100% correct but realistically I'm hoping for the best because this guy got a raw deal.