I agree that the earlier messages state it was to be shipped but, I am not sure what he can do if he received a pm from both buyer and seller that the coins would be hand delivered and then another set from both that the coins had been transferred in person and to release funds - what else can he do but release funds?

I'd say: "Rule One: Never change the deal." applies (quote taken from The Transporter movie). If anything changes, a good default would be to delay the release of escrowed funds quite a bit.
Maybe a better solution would have been to refund the buyer if anything changes. If they agree to meet in person instead of shipping, that requires a new agreement in which buyer has to fund escrow again to a new address. But that requires strict rules from the escrow, known upfront, which wasn't the case here.