I agree, a new CFI was needed. Very glad you found one quickly. The PIC is responsible to determine airworthiness (conforms to type certificate and is in safe condition for flight). It might be his “opinion” that the aircraft is unairworthy, but your old CFI definitely cannot “Ground” an aircraft. Anyone who can legally be PIC can determine the aircraft to be airworthy. Remove and replace faulty CFI, problem solved. I’m guessing your old CFI and thinks an A&P must perform ALL maintenance. 43.3 (g) You must own or operate the aircraft to perform preventive maintenance (can’t do it to your buddies plane) 43.7(f) you must hold at least a private pilot certificate to return the aircraft to service following said preventative maintenance. That said, fuel cap o-rings are about the simplest thing you can do and you crossed one problem of the list.