Here's the bottom line. The part of Title 8 of the US Code that applies to parents out of wedlock (8 USC §1409) talks about him inheriting nationality from his mother.
The part that I cited earlier (8 USC §1401) talks about inheriting citizenship.
There is a difference between citizenship and nationality; i.e., you can be a U.S. national without being a citizen, while all U.S. citizens are considered nationals. Green card holders are considered U.S. nationals (at least for the purpose of the US Export Control laws), but they are not considered citizens.
8 USC §1409(c), which talks about inheriting nationality is the section you are citing (if I'm wrong, please provide me the section number) in your discussion. It says, a person born, after December 23, 1952, outside the United States and out of wedlock shall be held to have acquired at birth the nationality status of his mother, if the mother had the nationality of the United States at the time of such person’s birth, and if the mother had previously been physically present in the United States or one of its outlying possessions for a continuous period of one year. Note: it does NOT say the citizenship status of his mother, just the nationality status. Remember: all citizens are nationals, not all nationals are citizens.
8 USC §1401, which is the one I'm citing, talks about inheriting US citizenship. It says, The following shall be nationals and citizens of the United States at birth:…(g) a person born outside the geographical limits of the United States and its outlying possessions of parents one of whom is an alien, and the other a citizen of the United States who, prior to the birth of such person, was physically present in the United States or its outlying possessions for a period or periods totaling not less than five years, at least two of which were after attaining the age of fourteen years
In other words, if she didn't meet the residency requirements of §1401(g), but did meet the residency requirements of §1409(c), then he would be a U.S. national at birth, but not a citizen (i.e., essentially a green card holder).
Hopefully that expressed the same thought a little clearer than before.