I've never played Tempest - indeed, my only exposure to the game and its creator is through NXE - but it seems odd to me that Atari would make such a big stink about this. I mean, yes, they own the name and the original game, but it's pretty damned obvious they were never going to DO anything with it.

I wonder if he could change some sprite data (and maybe arrange a new soundtrack) and successfully give them the finger?

For that matter, I wonder if crowdfunding could get the guy a lawyer or two to shovel this great big steaming pile of BS Atari has dumped on his lawn...