Dealer gives back "mucked" cards

[Eponymous]

Yesterday in a 10/20 LHE game at Borgata, a guy posts in middle position. Action comes around to him and he tosses his cards to the dealer, apparently forgeting he posted. Dealer slides them back towards him, saying, "You're already in, no need to fold." No one really says anything as the play continues 4 handed. The guy that almost folded ends up winning a pretty big pot with a flush, and the player with the 2nd best hand gets really upset, berating the dealer for giving the guy his cards back. Dealer says since they didn't touch the muck (there really was no muck at that point), they were still live since there was no more money for him to call.

After a lot of arguing, they never did end up calling the floor, but the 2nd best hand wanted the dealer to admit he was wrong or give him $100. Later discussion at the table pretty much agreed that the player shouldn't have gotten his cards back. What's the right call? There was no doubt that the player meant to muck his hand (even he didn't dispute this). On-line sites usually say something like, "Checking is free. Do you still want to fold?" Should live play be different?

My thinking on this is that dealer should have considered his cards folded, but after play continued, the other players can't complain only at the conclusion of the hand. They would have gladly taken his money if one of them won the pot. They can't wait to find out they lose then want something done about it. That would give them something of a freeroll regarding that player's bets, and it's a bit of an angle shoot. They should speak up at the beginning, or live with the result.