1. I'd have to hear both sides before I threw large stones.
2. Anyone that thinks that keeping peak levels down to -.5dB has anything to do with not ruining a song by pancaking it, has no business setting perceived levels and than sending it on to an ME. Looking at waveforms can be very misleading. Short songs in full view will appear to have much better dynamics than a song twice as long in full view, even if the short tune has much higher RMS. Saying the waveform looked ok, to me, is a red flag on the producer.
3. If the ME was yelling and truly being an asshole, that's not professional. The proper way would have been to ask him for a remix without the hypercompression, but are we going to bitch about the high profilers defaulting to stun, than bitch about it when one of them protests to the client for requiring a more dynamic mix on a song that obviously stuck out like a sore thumb and needed to be dynamic enough to be worked in to fit with the other tunes.
4. If a remix request got an argument, before I'd compromise all of the other dynamic tracks by ruining them to match the song in question, I would work on all of the dynamic songs in my normal manner, than attenuate the hot song by ear until it matched the perceived level of the dynamic songs. The hot song would likely now be peaking closer to -3dB to -5dB than -.5dB. I've been into the exact same situation and that's the best solution that I have found. I'd explain it to the producer of the 7th song in a calm manner and restate that a remix without heavy limiting prior to the mastering grind, is the best option, when he heard the ref.