I think they are right; one should be assessed a penalty for a rebuy.
I'm currently in the third season of running a league, and we have had the rebuy penalty from the beginning (We also use Dr. Neau's formula). Everyone is aware of this, so hopefully it encourages better play among the players. What would be the incentive if a person could bust out knowing that they could rebuy and then go on to win without penalty? I think someone who wins without having rebought should have that win count for more points than the person who wins after a rebuy.
If I can use a hypothetical: Player A wins 5 tournaments without having rebought, and Player B wins 5 tournaments rebuying each time. Who's the better player? Or taking it a step further; same circumstances, but now in the 11th tournament, Player B finishes in first after a rebuy yet again, and Player A finishes second this time, again not rebuying at all. Should player B have the higher season point total at this point?
Honestly, having the experience of my own league as a guide, I do truly believe that the rebuy penalty encourages players to play better.
Now, if you are trying to build up the pot for each tournament and your championship, then I guess that would be a whole other matter. Also, you say that you are 2/3 of the way through a season? I think you shouldn't make any rule changes at this time; people might get ticked off. You might wish to discuss this with your group, and then make any changes for the start of the next season.
Anyway, just my $.02.