Actully I tihnk you misunderstand the ruling. He's not saying you are flurrying with the natural weapons. I get the impression you are flurrying with your unarmed strikes, the flurry than ends and you can do your natural attacks with high penatlies.
Of course this IS overpowered and certainly worthy of a house rule. You might not have a high opinion of the sage or the FAQ, but Wizards is the maker of the game and thus the rule readings are considered by most players/gms as official.
P.S. And I do disagree with the Sage. The rules do not support his view and even if it did, that is certainly a broken rule than. The problem is that he is considered to be official and instead of having a long-ass debate with a player over what are the official rules, simply saying house rule would make life easier.