OK I read through this original post and left it there. When I saw all the posts I knew something was up. All the passion and drama. This is what I gleaned from all all this and a possible solution.
1. The guy sold the bike, notified the DMV he sold it to the bike shop.
2. Therefore he is not the legal owner, his actions prove he intended to sell the bike.
3. The bike shop is the actual owner.
I would suggest you offer the bike shop owner to fill out the paperwork to have the title he has properly issued to him. You will of course offer to do all of the DMV legwork and pay the fee. Once you have the the new title, he then transfers the title to you, and you again do the paperwork and pay the fees. At the end you have a legal title.
The kindly old man is not kindly, he is a con man and the more you talk to him the more he can con you. He has sellers remorse and sees an opportunity.
Yes it will take some work on your part, but you have also done a lot of work to get the bike where it is now. RIde it and enjoy the fruit of your labor.
As a kid from the Bronx I would whack the kindly old man in one knee with a bat and remind him that he has another knee we can discuss further if needed. I don't do that anymore.
All kidding aside, if that makes sense to you give it a try.