I personally think that for AKC it's ridiculous to sell a dog without papers. When you register the litter it costs an extra $2 for each puppy, and the total for the whole registration process is only $20-$30 depending of the number of pups. If I don't want a dog to be bred and he/she is being sold as a pet only (which is 99.9% of my puppies), they go with limited AKC registration and a strict spay/neuter contract. If they go with breeding rights then they get full registration and no spay/neuter contract. I do check up on my puppies and keep in contact with anyone who has bought a puppy from me, so I know whether they have been altered at the appropriate age.
I don't understand why you would sell a dog with no papers unless it is not AKC registered (CKC, APRI, etc. do not have a "limited registration" option)...if you don't want the dog bred then do limited and obviously the price will be less for a pet only.
Now, that being said, for my Biewer puppies it's a different story. They are registered IBC and IBC does not have a limited registration option. So if the puppy is sold as a pet only they go for a lower price and on the same strict spay/neuter contract, and I HOLD the papers until I have proof of the alteration from the Buyer's vet (in the form of an invoice, and a letter from the vet on letterhead). However, I don't charge more for the papers. The only thing I charge more for is full registration versus limited or pet only versus breeding dog.
If I buy a dog, whether I buy it for breeding/show or as a pet only, I still want the registration papers so that I know what I'm paying for is a purebred dog and I know the bloodline, etc, even if they are only limited registration papers. It sounds like the stud may have been originally purchased as a pet only and was used for breeding anyways. His original breeder may not care very much, but that is another story. I know if somebody that I sold a pet only to contacted me a year later and said, "I bred the dog can I get the full registration papers?" I would be marching over there to get my dog back. Of course that is why I have a contract.
If you are just going to sell him for the cost of medical bills (rather an adoption fee instead of selling him), then I would not worry about the papers. It's really up to you though, if the dog was originally sold without papers then that was the original buyer and the breeder's choice in a transaction, and whether the breeder wants to charge $200 for papers is his business. It's not unreasonable, no, but just seems strange to me. In the future though, if you do breed another female, make sure the stud has registration papers and see them before you do the breeding.