This one is really bothering me. It is perfectly legal to fish romex. That is unquestionable. The building was not gutted therefore the only way to rewire is to fish. The electrical inspector has no authority to burden a homeowner with the incredible added expense of demolition, disposal etc. There is no justification for what he is asking whatsoever. I would make this clear to the inspector. If this is not possible then it is an issue between him and the homeowner. At which point the homeowner should go way above this guy to whomever he can.