It may be that at this point, reinstating James would not be a terribly feasible idea, even if it is a nice thought. And, well, it's a volunteer position. I wouldn't blame him at all if he's no longer even willing to serve in that role.
I think, however, that the suggestions that have been put forth for a neutral outside review of the situation are long overdue. And the Board also needs to seriously reconsider what was (not) communicated when the situation occurred. Essentially, we got a load of say-nothing PR garbage, not a frank and thorough explanation, of why a trustee overwhelmingly voted for by the community had been involuntarily removed without consulting that same community.
I think there are a few points that need to be thought through. First, it needs to be clarified what really happened. Jimmy has publicly and bluntly accused James of lying about the circumstances of his departure, but has also steadfastly refused to say what he considers the truth to be and why. Having been accused that way, James has every right to defend himself, but the entire Board has steadfastly refused to say what they see the truth as actually being, only releasing PR gibberish that said absolutely nothing. If James was calling attention to serious problems at the Foundation and doing everything he could to find out more about them, well, I think it's pretty clearly turned out that he was in fact right. If that's the case, he was in fact fulfilling his duty to look after the interests of the WMF. And if James were acting with some kind of malfeasance (which I consider highly unlikely, but more as a hypothetical for if such a thing ever did occur), we need to know that, too, because chances are very good that otherwise, we'll elect him again by a landslide if he chooses to run again. I'm sure everyone knows the end of the story if that happens and the Board refuses to seat him.
Secondly, I think the Board needs to hold a frank and open review of its processes around dismissing trustees, especially community-selected ones. Even if it's not technically legally required to consult the community before the fact or frankly inform them why a decision was made after, is relying on a legal technicality to do an end-run around the community election process an appropriate way of handling things? I think that question deserves careful consideration.
Additionally, I think it needs to be considered whether a formal apology is owed. Even if too much water has passed under the bridge for reinstatement to be workable, saying "Hey, we're sorry, you actually brought up valid concerns even if we didn't agree with your methods at the time" might be a very good step toward the healing process. (If that's actually true, of course.) If the Board shot the messenger rather than addressing serious problems (and, well, that's what a lot of us think), that needs to be candidly addressed.
And finally, I think the communication style in itself needs to be reexamined. A lot of trustees come from corporate backgrounds where that type of opaque, "nothing to see here folks, move along" style of communication is acceptable and expected. Wikimedians generally expect better than that, and I think we should expect better than that. Ducking and weaving around direct questions breeds mistrust; sunlight is the best disinfectant. If you don't think your actions would be defensible if you publicly and frankly say why you undertook them, you probably need to rethink them. There will of course be times that some information will be necessarily private, but that should be considered an exception that must be well-justified, not the rule. And if that is the case, don't try to spin and obfuscate with a bunch of PR junk, just frankly say "We (can't|won't) tell you that because _________."
The volunteer community does need the WMF. After all, someone's got to keep the servers running, and handle things like legal services and the millions of dollars that flow through the organization. But the WMF needs the volunteer community too, or it may as well just shut the lights off on the way out. Each side should see the other as an equal and necessary partner and as an ally towards the common aim of creating the best free and open educational resources possible.
Right now, it seems that a lot of the community sees the WMF as an overbearing would-be "owner" of the projects that needs to be pushed back at every turn, and it seems the WMF sees the community as a nuisance to be stiff-armed out of the way if it dares to get in the way of some grand strategy. That's not a healthy dynamic, and we don't fix it without open, fully transparent, and honest communication.
Well, that turned out longer than I expected, but I can't really find any parts that I don't think need to be said. I think we're at a unique opportunity to reexamine how the WMF can best serve the goals of the movement, and what its role should be in doing so. I think we're also at a point to consider what exactly the Board's role should be in that, what its priorities should be, and how it should operate under difficult circumstances. Obviously, what happened this time was not optimal. Please keep the lines of communication open as you move forward with any reviews and reconsiderations. For better or worse, the perception will be that if you're not talking about it, you aren't thinking about it and don't care.