Wow, I think that is completely harsh and unreasonable. I feel respect is important also and don't let my kids get away with stuff but really, to return them all is just extreme. It wasn't as if he pulled out a ladder, climbed the roof and discovered a trap door that led to the gifts. They were in her room, assuming pretty easy to peek into. Yes, he needs to respect privacy but he's *9* and it's Christmas.
I really hope she changes her mind so he has some gifts at Christmas. I cannot imagine as a mom not giving anything to my kids, no matter if they lied about snooping or not. For mine, I know I could threaten to return them and let them sweat it out til then and that would be plenty.