Apparently this instructor was actually quite good in the past, I think this is just a really misguided attempt to make the class smaller because they don't have enough instructional staff. I feel like the only possible outcome is that the instructor is forced to rescind this syllabus and has his reputation completely ruined, which is sad. It appears that he's playing chicken with the university, and I don't think the outcome can possibly be good.
Seems like the sentiments have been echoed throughout this thread that there's been games around class size politics going on. That's amazingly unfortunate, and hardly restricted to Berkeley. I'm sorry to hear an otherwise good instructor felt forced into this position.