"But what if we added a third choice? What if we formally, publicly and noisily withdrew from the account? The worst case was that we could tell our engineering team that we should have won but the game was rigged."

No, the worst case would be actually going through with "publicly and noisily" withdrawing. If you want to scare away future large company prospects I can think of few better ways than letting everyone know you will raise hell if your product isn't chosen in a competitive procurement. I respect Steve...but this portion of the advice seems a little shortsighted. Go ahead and withdraw and explain it to your team and the customer. But, there is not a good enough reason to publicly shame the customer.