Require his dreads to be neat and clean, then move on. You can no more dictate hairstyle than you can dictate that men be clean-shaven; whether or not it's your established "rule framework", it's going to get you sued by the first litigious Muslim candidate you reject, and rightly so: modulo hygiene, employee hairstyles are none of your business.
He was obviously not rejected due to his religion, but due to not adhering (or wanting to adhere to) a policy that was in place prior to his application.
Note: I have absolutely no objection people having dreads, and would have no trouble with colleagues having it. I merely believe that a company should have a freedom to say "no thanks" to applicants not wanting to fit in the existing rule framework.
Also, it ticks me off slightly that he uses religion as a way to gain sympathy for his complaint.