It's an interesting read back through the full thread. We never did establish whether Oxjob was simply another Halstead alias to talk up the venture, but I will maintain my suspicions.
In terms of the CAA role, previous posters have (rightly) pointed out that the CAA ATOL Exemption 1 removes the need for anyone chartering aircraft of less than 20 seats to hold an ATOL. It is the very same piece of legislation used by Manx2 to launch and sustain its operations and in fairness to them, they appear to be hanging in there quite nicely after three years. Is it right to throw out a piece of legislation under which one business has thrived because someone like MH comes along and abuses it? I'd argue not, but I would argue that there is a strong case for action to be taken against MH for the fiasco which was Varsity Express.
The important thing here is to ensure that any action taken after this mess does not deter other, credible people from trying to make similar ventures work. TwinAisle's suggestions are all very well, but if applied nowadays would mean that easyJet would never have got started (it was a virtual airline to begin with too). It is equally the case that the airline licensing laws are EU law rather than UK law. Even if the CAA changed its policy, there would be nothing to stop under-funded Type B operators from other EU nations setting up shop in the UK to conduct operations. I don't think any of these suggestions could or would ever be practically applied.