It seems like GG has been fretting over this guy for a while. I think the frustration is past its useful point and i'd just give him the files and be done with it.
When I ran my own place, we just gave them the artwork with the design service. It reduced our need for backups (back when storage was expensive) and when a customer lost their disc, we could recharge them for the design (if we didn't "happen" to save their files) When a customer wanted to go somewhere else because they were cheaper, fine. Typically they would come back because we were faster/better/didn't hide additional fees/ or just plain nicer to deal with. If they "other guys" messed up their artwork, we'd charge them a revision fee to correct it. If there was now a deadline, we'd charge them a rush fee. Or, to preserve the relationship, i could waive those fees and "take care of them". You can decide based on how good of a customer they were, or just whether you need the money
Now, the caveats: all fonts were outlined, all files were PDF and all images were downsampled to 150dpi. Most clipart catalogs have a LONG copywright guide for what you can and can't do with their images, so many times a clipart image would be replaced with a jpg on the artwork i gave to customers (legal restrictions on the clipart).
I understand that doesn't work for everyone, but a lot of designs are pretty straight forward, and many of us include that in our production costs anyway. Also, a coro sign and a logo creation are widely different and should be charged as such. you can also provide 2 charges for creation; one that includes artwork and one that doesn't. This way you are covered either way.
I hope you get done with this guy quickly, as its probably taking you mentally away form your other work, and its people like these that made me prematurely bald
don't be like me