The crux of the matter is whether it is possible to reduce a bishop to the lay state. Most authorities believe it is not.
The only thing the Pope can do in this situation is remove the bishop from his diocese and his activity, because nobody, including a bishop, can licitly continue this without the ultimate permission of Rome.
However, in terms of the sacrament, he still remains a bishop, just as you and I still remain baptized Christians (with the mark on the soul) no matter what we do, even if we wish to renounce it. Renouncing it is simply not possible, because it has effected an ontological change. There have been leftist idiots in Spain who have sued the Church (and won!) to get the parish to remove their baptismal record. But the bad news is that, record or no, it still happened, and things will not go well for them on Judgment Day.
Therein lies the problem.
I don't know why a bishop couldn't be reduced to the lay state.
The ontological mark on the soul of a deacon or priest is just as permanent as that on the soul of a bishop. Reduction to the lay state has nothing to do with this ontological reality.
To be reduced to the lay state is merely to be dismissed from the hierarchy of the Church.
sitetest
As I said, the charism of Holy Orders cannot be removed from the soul. However, that is as true of the priesthood or diaconate as it is of the episcopacy.
Expulsion from the clerical state merely means that the person cannot licitly function as a cleric in any capacity.