Taking about 15 steps back, the whole argument is ridiculous. People ought to be able to set up any displays they want if they run the joint, whether it's nativity scenes, voodoo scenes, Buddhist scenes, or certainly the menorah.
People who don't like it should be able to complain, but not sue. I'm quite weary of the concept that we must all capitulate if a couple of people are offended about something.
I'll bet if this Rabbi asked to put up a menorah that he donated, none of this would ever have happened.
Last first. I won't accept your bet. Chabad supplies the Menorahs, you'd lose. They set them up by the thousand. Generally with no problem at all.
Like it or not, the airport is a public facility, and the government, which includes the courts, decides issue like religious displays. Not the 6 person council running the port authority. That could be solved with a Constitutional Amendment, but it's really not worth the time or effort. Most people aren't bothered by seeing a Christmas (sorry Sea-Tac, there's no such thing as a Holiday Tree) Tree or a Menorah or a Crescent displayed. I haven't mentioned it, but my guess there are totems displayed at Sea-Tac as well, which frequently have religious connotation.