I haven't been on here for a while so I just saw this thread. I have a unique perspective on this issue as to how the FNAEB (Filed Naval Aviator Evaluation Board)process works. I was on the COMNAVAIRLANT staff from 1998-2000 and it was my job to process every one of these that came to the Admiral.
While I don't know specifics of this case, there were several that were similar in nature that crossed my desk. When one of these boards is convened, they are tasked with evaluating the factors of the incident and making a detailed report to the squadron's CO. He then endorses it with his recommendations and forwards it up the chain of command through his CAG or Typewing Commander and then to Airlant. When it gets there, we would convene a review panel of about 5 Officers, usually Commanders and Captains to review the package and then interview the individual. Normally, at least one or two of the reviewers was qualified in the aircraft in question. The tone of these was different every time and would depend on the individual and how thorough the FNAEB looked at the case. Some guys needed a sympathetic ear and some needed a boot in the arse that they didn't get from their CO. After that, I would compile a summary of the meeting, forward it to the Admiral with the panel's recommendation, and schedule a face to face between the Avaiator and Admiral where he would make his final decision.
Very rarely, the Admiral would make a decision counter to the chain of command. When he did, it was due to a whitewash of the event because he was "the best pilot", or maybe they hadn't given the guy a fair shake and wanted to get rid of him. Those type of cases would really piss off the review panel and the Admiral too. Those COs usually got a personal response directly from the Admiral. Not fun.
I don't ever remember anyone removed from flight status that was a contentious case and against the chain of command recommendation, but there were certainly a few that if the Admiral had made that decision, it would have been understandable. It could be that in this case, there were extenuating issues that aren't public knowledge, or there had been a rise in incidents throughout the fleet and a signal was needed.
I don't know if the review process has changed, but if it has, it's still probably pretty close to what I described.