Protest Denied -- LL

[NorCalBlue]

The following situation happened last night in a Senior Division All-Star game (Tournament Rules in effect):
With two out in the top of the sixth inning and "Team A" at bat with a runner at first base, the manager substituted a player from his bench who had started the game in the eighth spot in the batting order into the first spot (currently at bat) in the order. The substitute batter hit the second pitch for a single. The "Team B" manager immediately logged the protest and Western Region Little League (San Bernardino) had to be called.
The ruling from San Bernardino was that the at bat stands (a legal hit?) and the illegal substitute was to be replaced on the base paths by the player for whom he was substituted. Protest denied.
Could someone explain this to me?
The Tournament Rules (back part of the rule book) clearly state that any starter or substitute can re-enter the game ONE TIME, but ONLY IN THE SAME BATTING POSITION.
I don't have a rulebook with me, so I cannot figure out what it says about PENALTY.
Can anyone help.
BTW, I was not a coach, manager or parent in this situation, so I do not have any sort of emotional (or other) attachment to this ruling. A friend of mine was involved in this one as the manager and is perplexed as to the ruling. I'm just curious as to if this could be one of those "Little League tries not to decide games" things.