He can fly a UK Reg aircraft on the basis of his FAA Certificate at the moment however the rules will be changing under EASA in 2012. The CAA has the right to prohibit him from exercising the privileges of his FAA licence if they wish to do so and they have done this in the past. Therefore, if he has failed his UK medical and wishes to operate on a FAA certificate, the less people who know about it the more likely he is to get away with it.