It looks to me that PWC are the ones who are going to end up...

It looks to me that PWC are the ones who are going to end up looking foolish.
According to the release they agreed with the treatment in Dec-17 to use fair value, they've been consulted & provided with all the information they've ever requested & then suddenly on the 22nd Feb they turnaround & say they don't have sufficient information to form an opinion.

So what changed? Did it suddenly dawn on them to look at what PNC's peers were doing & then second guess themselves because they were doing the alternative or was it a change of personnel at PWC?

The standard obviously allows the use of either method otherwise it wouldn't have got to this point, PWC would have insisted on using amortised cost over a year ago. So it comes down to what is the most appropriate method.

Having dealt with a lot of auditors over the years a lot of them have very little commercial acumen, especially below partner level. To me i think the outcome of this will all depend on the audit partner at PWC & whether he has the humility to accept that Keith has a better understanding of the commercial reality of the situation or whether he is too arogant to accept this. 

I've seen similar situations in the past where auditors & directors disagree on principal on items where other auditors don't. In those situations the auditors usually get changed to ones with a more favorable view & as PNC has taken other advice on this matter from different parties i don't think they will have any trouble finding a more compliant set of auditors.
If PNC was a lot bigger account to PWC i doubt whether this issue would ever have become public.

I suspect what will happen is they'll find a way to get through this years accounts, probably by disclosing both methods, & then change auditors next year.