My first instinct is to wait for those who actually have an informed legal opinion.
But this is a forum, so here's my horribly uneducated guess at what is happening
FULL DISCLAIMER: all the above might be total rubbish. But this applies to everything else people have written so far about this response...
The WG agreed to a consent order that was carefully worded so that (amongst other things) they would be required to explain their original decision, giving full reasons and specifically their interpretation of the CROW act. This would then present a simpler case for a judicial review (if we didn't like their interpretation of the CROW act. It was always expected that the next step might be a (more straightforward) judicial review, and realistically there was little chance of the WG suddenly changing their mind so I guess this was the likeliest outcome.
Unless they have managed to weasel out of this due to poor drafting (and I have no reason to think this is the case), then there are two obvious routes this can go.
1) they haven't stated their interpretation of the CROW act in a way relating to their decision, in which case they may not have complied with the consent order
2) they have stated their interpretation of the CROW act relating to their previous decision, and it can be challenge in a straightforward judicial review.
I will also be waiting for Dave's summary of the lawyer's responses. The logic is, I believe, that most of the legwork making documentation for the case that caving is included under CROW has already been done, so a straightforward JR would just be a restating of that (incurring minimal costs, hopefully).
PS I believe that 90% of that WG response is completely irrelevant. All that matters is that they state their interpretation of the CROW act as it applied to their previous decision. Therefore I most of Stuart's points are not really of concern to me (although clearly they have finally got their act together in actually making a coherent response).