That's the usual way of doing it. When a project grows and gains more contributions you can have the AUTHORS file have a list of former major contributors and project founders, current major contributors, and a note acknowledging the dozens of occasional and drive-by contributors (who get full credit for their patches in the revision logs).

His request is not unreasonable at all.

I think the license says his name should not have been removed in the first place?

"Original author" sounds more clear. I like how rpcs3 done it with "former authors" block at https://rpcs3.net/about