It seems to me that "chairman of the physics department" is a real job with real work and you want someone there who is able to do it. Do you think he was able to do that job properly with this hanging over his head? If not, he should have moved on.

Taking away his title is far removed from firing him and washing their hands of him, as was implied. Based on what he wrote it's fair to assume that he's been talking with the university during the process, the talks have been productive and positive, and it's possible he will be reinstated.

We won't know for sure until he publishes "his side" as he put it, so it's all conjecture at this stage, including on my part.

Compared to the university going through the hoops to fire a tenured professor, it's reasonably fair. A lot of physics departments do work with outside companies and the government as well; a chair arrested for espionage isn't conducive to those sorts of relationships. I'm surprised that the university was willing to refrain from throwing him under the bus, all things considered.

No one liked being the chairman of the math department when I was studying there. It's a bureaucratic job that gets in the way of what professors usually want to do: research. It's a big, important job, and you want someone doing it who isn't dealing with the fed :)