As a long-term watcher and part-time contributor I feel that I have to jump in and have my 2 pence worth. I am quite appalled at the treatment of this chap who has faithfully served the UK for so long.
I am a dodgy foreigner myself (commonwealth) who joined the RAF in 1999. The Brit embassy who recruited me said that I would be issued with a passport when I arrived. I remained an illiegal immigrant (whilst holding the Queen's commission) for the next 3 years and was even sent out of the country to hold while they sorted it out! Needless to say nothing was done and I continued to rely on NATO travel orders to see me through border crossings.
During a tour in NI an Army major thought this was the most proposterous (yes he did use that word) thing he had ever heard and asked my permission to write to his MP. 3 letters later and I was invited to apply for naturalisation. The passport was then a mere formality.
My point is that there are precedents there to use in your battle with the great unwashed. My feelings are that there will be too much negative publicity and they will roll over in the end...they always do!