I would not want to have my name associated with an installation that is unsafe. In your situation, I would tell the homeowners that either it will be brought up to code, or I am walking away.
That said, the relevant rule is in the (unenforceable) Annex H, article 80.9(B). This so-called "Grandfather Clause" is frequently misinterpreted as allowing an existing condition that does not meet current code requirements to remain as-is, PROVIDED that it met the code requirements that were in effect when it was installed. 80.9(B) does not include that later part. It says nothing about having ever met the requirements of any previous code edition. It does, however, give the AHJ the ability to say, "This is unsafe; tear it down." I am surprised that your Inspector did not take that action.