This stuff is being widely debated all over the place, but as you mention it I think it's worth making just a few points as regards responses to it.
The DfT proposal is so poorly researched it's hard to know where to start taking it apart. However I feel that making the author look a complete fool will be counterproductive.
The DfT believe (I've spoken to them in the past, on largely unrelated matters) that people go N-reg to skimp on maintenance. It is of course possible, though IMHO less likely, that this is a position designed to facilitate the proposal...
It's vital to make the point that most people go N-reg for the FAA IR, and that there is little (usually NO) maintenance cost saving because of the limited options on where to get the work done in Europe. The CAA know this very well already (I've spoken to them too).
The DfT acknowledges there is no evidence of reduced safety of planes on foreign registries. This is one fine piece of honesty in the whole proposal.
The estimate of the economic cost of going back to G, £250k in the proposal for the whole UK fleet, might cover the cost of moving a single bizjet to G! The cost over the whole UK fleet is probably 100x more than their estimate.
The effects of the proposal on upmarket GA (turboprops and bizjets) will be much more financially severe than on the piston end and rest assured these people are busy doing their bit, through the additional avenues that are open to them.