Robert,
The title isn't the problem. He has the title and should be able to register it if it was previously registered in that state.The problem will be when he tries to sell it or moves to another state or anything that will require a DMV inspection.
Jack,
I would think that if you have the title and the hidden VIN matches the title you should be able to get a state issued VIN tag and stay right with the law. It may require,and I would demand that the shop owner sign an affadavit or "Statement Of Facts" explaining that he removed the tag and that it was neccessary to do the repairs and that he bears responsibility for its loss. If not then I would say you have good grounds for a suit. The value of the VIN tag is a complicated issue. It will depend on a combination of factors such as the condition of the car before work started, the condition now and the potential condition/value of the finished product. In effect, without a VIN tag all you have is a collection of parts and in some states even that might be in doubt if you can't prove ownership of the vehicle they came from. The maximum value of the vehicle can only be realized with the original VIN tag but a state issued tag is better than none and depending on the rarity/desirability of the car in the collector market may have only a minimal effect on its value.
I believe you said your VIN tag was riveted on and that could be a problem since GM didn't start riveting VIN tags at the factory until 65. Yours should have been spotwelded on and if they removed it I would think they would remember it since it is very difficult to remove one without tearing the spotwelds. Not that I've ever done that.
:
The first thing I would do is get a mirror and crawl under the car and try to find the hidden VIN to verify tha tit matches your title. Once you know that you should have a better idea which way to go. Find out the process for getting a state issued replacement VIN tag.