If you actually are running a game so your friend can play it, play it his way.
I understand him sitting out, the frustration to be restricted by a game master after the game has started are,well, frustrating.
Would you stop the other players to buy a rod of quicken? If no, I understand him too well.
Did he restrict you when he was gm?
My opinion are that restrictions should apply to all players, not just one.

I have quit games myself because of restrictions. Only advice I can give are to choose the guys and gals you gonna play with all are on the same page when it comes to min\maxing.

There is nothing wrong with you as a gm imo, but I understand your friend too well.If you let him into the game again, he will probably lay low power wise until things hit the fan and then he will unleash a can of whoop ass. He will just hide his power until needed. That is what i would have done. And I have done it. The sad thing is that will probably destroy the game for the other players. I i were him, I would rather sit out than to be restricted to nothing while the other players can do as they want. If you let him in you will probably ruin the group... Its a lose lose situation.

For myself, I am happy i have fun being a gm