I think your understanding is correct, although it'd probably be a good idea to consult with a professional just to make sure that there aren't any hidden details out there. You may also want to make sure that there won't be any future immigration issues if he'd like to continue visiting the U.S. after giving up the green card--I know there's a provision in the U.S. immigration law that makes it hard for U.S. citizens who expatriate for tax reasons to get visas to return to the U.S.; I'm not sure how that would play out for a green card holder. I don't think that will be an issue, but I'm not familiar enough with immigration law to be sure. The current version of section 877 was put in place largely to keep American billionaires from expatriating to low-tax countries--there were a bunch of high profile cases of that happening in the late 1980's and early 1990's. The way it is drafted, it does encourage people like your father to leave before their 8 years are up, which, you are right, doesn't make a whole lot of sense, but that's the way Congress decided to draft it.
-- Chris