I'm saddened by the way it's gone down, hardly the end you'd want to such a successful partnership. To be honest, as long as Kauto is happy and enjoying himself, I don't care where he is. It was obvious at Sandown that he was rather bored and eager to race, so it sounds like he needed to be doing more than he was at Ditcheat. Remember, he's only trialling dressage, if he doesn't take to it then they'll find something else for him.
Re Nicholls, I feel bad for him and everyone at the yard, but Kauto is still Clive's horse. It was obvious from a long time ago that Kauto's eventual retirement could cause issues with Paul being so emotionally invested. What would be a nice gesture by both sides is that they agree to let Kauto go off and have a nice active second career doing something, but when he is finally, completely retired, he's brought back to Ditcheat to live with Clifford.