Guys - while I agree with the sentiment, I'd be careful with the assertion he has no rights. Did he get paid for playing? If he did, then you could argue he gave away the rights in return for the payment - just a like a session musician. If he didn't get paid, and even paid towards it by giving away his share of a gig fee, then he would indeed have a right to control the recording of his performance. In the UK, we have one agency (PRS) to protect the rights of the composers, and another (PPL) who protect the rights of the people who played on it, and the record company. If you didn't bother with a formal contract, then your argument in court would have to be that he had verbally agreed to allow his performance to be used - which no doubt is what happened. If he's an idiot, it's unlikely he would have performed at the recording if he was unhappy. His subsequent fallout shouldn't impact at all.
Have you paid the fees to use these songs on the net? Here in the UK, web usage isn't that cheap, but equally not that expensive. If you are an Abba tribute, then you realise that using a B&B song means you have to pay, so how is this different to the rights you all have if somebody uses your demo without permission.
Rights are real - and we all have them. In his place, knowing the way things are, he's unlikely to take a legal route - but this doesn't mean he couldn't and would probably win. My own band have exactly the same thing, but the guy I replaced is perfectly fine with it being him on the CD we sell, and not me. However, if we fell out, in the absence of a written contract detailing this, it would be not so cut and dry. Could the band be in trouble? Perhaps. This sort of stuff is tricky because it's dull and unexciting, so needs an expensive test in court. My best guess is that Judge Judy would say that because he gave permission when he was in the band, it's unreasonable to remove it, just because he left - but Judge Judy may well know some legal precedent we don't!
I'd still tell him to stuff it, of course, but I'd not be so certain that he might well withdraw permission to use his performance, and there's no doubt that his performance is covered by his copyright on it, if it wasn't signed away!
Good fun!