Sure, without Nightwolve's extractor it would take them longer to release, there would be no fan translations to base it on, so it would be nice of them to reward him in some way... But demanding it in the way he does is way over being reasonable.
First of all, I think the title of this thread should be renamed. The translator was compensated for his translation. XSeed didn't steal anything.
Second of all, yes, the original translation would have taken longer without that extractor tool, but in the end XSeed paid for the filled-in translation template. (which was made without that extraction tool) XSeed has nothing to do with the means that indirectly contributed to the fan translation upon which it was based. They don't owe money to whatever company published the books that the translator used to teach himself Japanese or to whatever teacher helped the translator learn Japanese. They don't owe money to Microsoft for producing Excel, which is used to fill in the translation templates. Need I go on?
Sure, credit would have been nice, but it's not something XSeed can include in the game. That's because the creation of that extraction tool essentially involves hacking of the original game's source code and Falcom wouldn't have been pleased to see the guy who hacked one of their games get thanked in the credits of the localized version of that game. Not sending the lawyers after him was a given, but officially thanking him for hacking their code would probably be a smitch too far for Falcom.