I'd argue, quite strongly, that the LA has not changed any appealable part of the decision. Recovery is an entirely separate issue to deciding recoverability.
The former has no appeal rights; the latter most certainly does. Based on the info given, it seems the LA still considers the o/p to be recoverable. Therefore, there "revision" is nothing of the sort, or, if it is, it is in any case not more favourable to your client.
Letter off the LA I think - may be worth mentioning that if the LA fails to forward the case to TTS, you will approach TTS independently (there is a CD to support such an approach).
Hope this helps.
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