This is my take:

If the roof hadn't leaked, there would have been no reason for anybody to inspect it and insist you have the whole thing replaced because even the sound part is not up to code. Therefore, if the building inspector insists that the whole thing is replaced, it must be part of the same insurance settlement.

Equally, I'd say the insurers can't insist on the work being done as a condition of continued coverage unless they're prepared to pay for it. The section of building code quoted somewhere earlier in the thread seems fairly unequivocal that you do not need to bring structures up to today's code if they are not being altered (which would seem, from your description, to apply to the undamaged parts of your roof).

If it is not covered by the claim, you cannot be made to have it done. Seems fairly straightforward to me.

Is the loss adjuster related to the contractor?

We are begining to think the contractor is related to the both the structural engineer and the roofing contractor..

Thanks so much for all your advice - I will read it all to my OH when he get's back from work tonight.