Advice from a chap at the CAA is that, unless the pilot concerned could provide evidence in the form of a letter, signed by an authorised officer of the FAA, that the FAA would find a UK issued sub-ICAO licence acceptable for the purpose of flying an N registered SSEA in the UK, the answer would be no, you may not do so.
This is self evident fact. The FAA and only the FAA can decide what privileges (if any) a particular license confers on the pilot of an N-reg.
FAR 61.3 already covers this but only for ICAO licenses. However, it does not use the word "ICAO" and this is where the ambiguity arises. IMHO, the context of the FARs eliminates this ambiguity, and a non-ICAO license would not meet 61.3 unless the FAA says so.
This is like the other argument which has been done to death already: whether the IMC Rating is good for an N-reg. I have a written reply from the FAA saying it is fine.
But no matter what written reply you get from the FAA, somebody will always stand up and say that anything short of a reply from the FAA Chief Counsel is worthless. I regard this view as ridiculous because it makes any written answer from any official body completely worthless (which is clearly not the case).
David - your point of view is hard to argue with and all VFR-only pilots (which is also a huge industrial lobby around Europe; all those plastic ultralights etc) will love this. However, it brings a risk that it will sideline the whole "private IFR" scene into a commercial-only route, and that is a BAD thing because IFR delivers a huge increment in mission capability specifically, and in the overall value / return one gets from flying generally.
We already have a situation in which the vast majority of new pilots chuck flying in very soon after getting their PPL. Look at some of the reasons why there is this ludicrous attrition rate.
As for the GP medical, everybody would welcome this. All data shows clearly that pilot incapacitation barely features in the accident stats, and most of the things checked in the Class 1 or 2 medicals (I hold both CAA and FAA Class 1s) are utterly irrelevant to
sudden pilot incapacitation anyway. The key thing is that this is
equally true for VFR and IFR so delivering a PPL which has a GP medical while stripping out any IFR route is worthless to many pilots.