It is pretty hard for me to believe that this subject is still being debated when there is a very clear code that covers this with no gray area. I have already stated my position in a previous post that a 20a circuit is required and that to me is pretty simple.
Extending an existing 15a circuit is still ADDING a receptacle and a 15a circuit and receptacle is clearly not allowed. Also given the fact that the initial installation was incorrect in 1996 should really wake up the contractor that he/she is doing something wrong to something that was already done wrong.
Apparently the 2nd inspector lacks in more than one way. One, for not understanding and knowing the code and two, for conflicting with another inspector without first consulting with him as to reasoning.
This install was not done in NJ, NY or CT so none of the relaxed, existing building and electrical codes apply.
There are plenty of other real gray areas of the code that we can debate other than this very simple black and white one.