Seamus was probably the strongest contender out of all of them. However, if you're going to enter a competition like this, you should take the judges/mentors/whatever comments and think about them and change things they suggest. On that panel, you have a respected singing teacher, two leading West End actors with a lot of experience, an experienced producer and the man who wrote the musical in the first place. Reason tells you that they know more than the average Joe Bloggs off the street even if Seamus is a singing teacher. Seamus did not up his game at all in the three weeks he was in the show. Other Josephs, especially Keith IMO have shown that they can take direction and improve. No one is perfect, Seamus should have been taking more risks, pushing himself to the limit, we all knew he had a nice voice and could perform... what else could he do?
Secondaly, surely if you are treating this as an audition (which is essentially what it is, a protracted audition over many weeks), you don't sing and then argue with the people you are auditioning for. That would be a fantastic way to go to a job interview wouldn't it? "actually, you're wrong, I was great!"
Thirdly, as John Barrowman said to Seamus repeatedly, as a leading man you are part of a cast, you have to work with others. Andrew Lloyd Webber has seen even more of Seamus than the public have, and even the bits we've seen show him to be a bit of an arrogant self-absorbed man who felt it was his right to be Joseph. The impression he gave was that the part was already his and that he therefore didn't have to pay any attention to any comments anyone might make, which is a great way to carry on in the theatre business. He clearly couldn't take direction and seemed above any comments anyone could make, making him difficult to work with.
Fourthly, as other posters have pointed out, this show is also one big advert for the show and people are affected by the personality behind the person on stage. People would be put off by Seamus's attitude.... especially if he insisted on changing the words to a beautiful song.
So all in all, right decision. Maybe he has a great talent, but at the age of 36 he should really learn some humility and realise that other people do know better on some things. After all, if he was really so fantastic, wouldn't he already have got himself a lead role in something?!