Here is the situation as I see it (in broad strokes):
1) Mr. Foley has decided to make his stand and shakeup a community of hobbyists. I will not attempt to go inside of his head and guess at his personal motivations.
2) Whatever his motivations are (money, personal satisfaction, morals, etc...), he represents a threat to the hobby that we all know and love.
3) He has initiated a canvasing campaign towards the various hobby-related vendors in an attempt to exthort money.
The remedy?
1) There needs to be an unprecedented banding together of all involved: a) The Vendors (Oscar, Emdkay, Mamemarquees, Slikstik, etc...) b) The Programmers (Nicola, Aaron Giles, etc...) c) The authors & webmasters (shameless plug for Saint's book) d) The hobbyists e) The artist of the MAME logo
2) We need to find out if there's an attorney within the BYOAC community who would be able to serve as an advisor
3) Create a united opposition
I'm probably just re-stating the obvious.