My only concern was that this choice was made for him through the bullying posture and words of another. I was just concerned at first that he had been bullied into his actions.
I can certainly identify with this feeling.
I guess that for a number of people on the thread, the reaction to the story revolves around the question of whether Dan could have 'taken' the other instructor. If he could have, then it's possible to see his choice as wise and generous; if he couldn't, then the suspicion arises that Dan was forced to submit. I've heard AiKiDo teachers say, "if you don't know how to hurt the other person, you can't choose not to do so."
While I think those ideas have a lot to teach us about our attitudes towards violence and non-violence, my personal reaction to the story is a little different. I guess that I hope that I, faced with the same situation, would find an answer that taught me as much and stayed with me as long as Dan's answer did for him. Ultimately, the value of the situation for Dan is in what he takes away from it, and how much use he manages to make of that. His submission or, alternatively, his faithful adherence to principles of non-violence both seem like secondary questions for me.