Command Authority
The controller(s) were clearly at fault here..."land at a closer/different airport" is not an acceptable response to the the PIC emergency request for 17C. "Reprimand/retrain" are not appropriately strong enough post-event fixes for the debacle either.
Having said that and having listened to (at least a portion of) the tapes, I believe the the pilot did not exercise his rightful command authority in a forceful enough way. The Human Factors guys will have to sort that out.
In a very recent personal experience, I lost one of the two available engines that came with the aircraft (with what seemed like important pieces of the machinery departing the aircraft) on intial climb after departure from a major NYC GA airport at MTOW(what else). After securing the engine but unsure of secondary effects(like fire) , an emergency was declared with Departure Control along with the information that we would return to the departure airport and which runway we would use. The controller acknowledged the emergency status but then stated that XYZ airport (a smaller GA field not the departure airport) was "twelve o'clock and 4 miles and XYZ ATC will be advised of your status". This was tempting for a virtual straight-in but I refused and advised I was initiating a turn back towards the departure airport; it was night-time, I was un-familiar with the XYZ aerodrome, did not have landing charts immediately available, did not know the AFRS status/availability, and did not have the time or inclination to explain or to sort all that out. Controller again attempted to direct me to XYZ instead of the busy departure airport (at peak time of 6 PM local) which was now about 6 miles away; I do not wish impute any motive to the controller's suggestions (which may have been properly motivated), but, at the time, my thought was that the recommendation might be based on our possible interuption of the heavy-iron traffic flow at the departure airport. I then said something like " look, this is an emergency, we are returning to ABC for runway 00 " perhaps with a hint of irritation in my voice. This quickly clarified the situation and a crisp "yes sir, suggest heading of HHH for right base for runway 00 ( a prohibited traffic pattern to this runway in normal ops but now the shortest distance to the stripes) ..cleared to land....equipment rolling" response quickly followed with all further communications being very brief, professional and solicitous of our status. The night landing a few minutes later was uneventful, no fire, engine destroyed, pax relieved to be on terra firma.
I would have liked to have seen a firm "this is what we're gonna do" (unless you tell me the desired runway is occupied or contaminated) approach by the AAL PIC.
But.....All's well that ends well.