Neither explanation makes sense to me. I have a feeling there's stuff none of us knows about. I don't know that engaging in these rumors is really the best idea. But since it's out there, I feel doubtful of the PP side because of another incident.
Years ago when Khan left Kamelot, there was an official generic statement from PP, since Kamelot was to perform that year. But then people involved with PP kind of dragged Khan's name through the mud. He pulled this at the last minute, he left them in the lurch, he screwed the festival over, he's just not a good guy, etc. I saw Thomas Youngblood not long after, and he, who probably had as much reason as anyone to be upset at Khan (and he was upset), said it didn't go down like that at all. He said he didn't want to go into the specifics, but he was uncomfortable with those rumors going around because they just weren't true. He said he'd heard from another band that didn't play that there were some issues behind the scenes there as well.
So... Who knows exactly what's true. Maybe it happened just like the rumors and James just decided out of the blue that he needed more money months after he agreed to the original fee. Maybe it really was because of DT and the ProgPower people got pissed and started this rumor out of spite. I think it's more likely that neither are exactly true.