I see him having two options; 1) comply and take down all the advertising plus put up a clear disclaimer that he's not affiliated with IKEA or 2) radically change the site to remove all mention of IKEA and their trademarks.
It seems nuts that he should have to change the domain or remove advertising (not that I'm a fan of advertising, but it's not my site), when the whole point about this Trademark protection is brand confusion. The C&D letter is not a court order, the real problem is that this guy doesn't have a dedicated team of lawyers to fight it if it does go further. Or, can somebody with actual Trademark law knowledge explain to me what's different about this guy's site compared to other fan sites for other companies?
How about option 3:
3) Keep the advertising, keep the mention of IKEA products, but make sure the design of the site and logo don't look just like IKEA's, and put up a statement that makes it clear.
There are plenty of fan sites for various other things that use the name of the thing they're a fan of and have advertising, but which nobody would be stupid enough to confuse with the actual thing's site. For example, I have a Nissan Xterra. I sometimes visit the forums on xterraownersclub.com. I'm pretty sure I've seen advertising there. The site actually uses the same colors as nissanusa.com (black and red, although it might be a darker red), however the design is different, and the site's logo looks nothing like Nissan's logo.
Why should this guy have to remove advertising, and why shouldn't he be able to use IKEA's name in that context? The problem comes if his logo and site look just like IKEA's. Frankly, unless he's already changed it, his logo looks nothing like IKEA's. However, if that isn't good enough for IKEA, I doubt he'd have a problem putting a little disclaimer right below the logo along the lines of "This site is not affiliated with Inter IKEA Systems B.V. IKEA is a trademark of Inter IKEA Systems B.V." I doubt IKEA had to make him remove advertising in order to protect their trademark.