whew...I'm stuffed on popcorn...this is getting good

Yea this is ridiculous.
Not only that but noone has any real proof of any of this.
There is sufficient proof to easily hold up in a criminal court case, IMO.
I respect eligius a lot and would say that the reputation of eligius would be sufficient to believe you if you say that there is proof. However I would be very interested to see proof.
In regards to the proof holding up in a criminal case it is important to understand how complex Bitcoin is. You need to be smart to understand even much of the basics as to how Bitcoin works. I would be surprised if you could explain to a jury (made of up "average" people, most of which likely would not have any technical background) how a pool works or how miners work in enough detail that would allow you to explain the evidence.
In regards to should he be paid if he is withholding blocks, if it appears that he withheld three blocks (for example) then 76 BTC (I would be aggressive with TX fees) should be withheld from his payment, at the very least. This is regardless if he was doing this intentionally or not and is especially true for such a large mining farm.
If it is apparent that he was doing this on purpose (if this person is who he says he is then he was doing it on purpose) then there is no reason to provide payment at all IMO. Intentionally withholding blocks from pools will degrade confidence in pools, which would lead to a decreased number of people mining in the first place (they would only solo mine and only if they could do it when they have enough hahspower that luck will not be a big issue), which would lead to centralization of mining.