I think he's doing the right thing by releasing it as OSS. Hopefully he'll pick up some support hours if anyone actually ends up using it.
If you added the proposed restriction, you demonstrate that you will take revenge on deadbeat clients by trying to give their competitors a leg up.
Don't get me wrong- I think he's totally within his rights to (publicly) exclude him from the license. And as a developer who's been stiffed before, I sympathize. I think the restraint he's shown so far in that README is noble, and I hope he gets some good PR (and thus new clients) out of this.
1) out $6500
2) feeling dumb for getting cheated in the first place
3) feeling bad for having pseudo-publicly excoriated a likely innocent
I wish in retrospect that I had taken the higher ground, open-sourced the code and just moved on.