The small effect on story or continuity due to the retcon seems a small price to pay to me to have a player that enjoys their character.
I don't really look at it as a continuity issue. People grow and change. I've been good at things in the past that I'm not so good at now because I didn't practice and keep it up.
I see that happening here. It happens so rarely (a character only gets a handful of feats during his lifetime) that I think there will be no story issues. The character is plain just not as good at something as he used to be.
In my experience, as long as you add a caveat that they can retrain a feat for a feat that they would have been eligible for at the level they took the feat to be retrained, everything works out fine.
If you took Weapon Finesse at level 1, and then at level 6 realized that you never used it and would like to change it, you'd have to change it to another feat you could have gotten at level 1.
I like the sound of this, but what I don't like is the hassle it brings with it of having to figure out which Feats are elligble. The higher level the character, the more difficult this becomes.