Network Rail is now denying the BBC story.
That'll be simply to avoid the headlines about Dawlish losing its direct service...
You could probably protect the four miles of seawall route with gold-plated sheet piles for less money than it's cost to put the Tavistock route back in. Can't realistically see it happening, though maybe the route should be protected through the planning system anyway, just in case. The LSWR never looked particularly direct, which is probably why it was closed.
But the route is already de-safeguarded (i.e. built on at the Western end) according to one of the links above.
And, yes, it always looked like a result of capitalist competition more than transport planning. Though the Dawlish seafront was always a kluge, wasn't it?