I would say that the supervisor was probably 100% honest and totally ok with it. He then goes to HR and asks what kind of support they can give, and the HR troll hits the kill switch. Although the idea that a cryptographer for a defence contractor would be granted remote access to the systems they would need to do their job is an interesting one from a security perspective.
Of course, it could be that the supervisor is a wet blanket who cannot handle conflict, plays the sympathetic boss and then runs to the HR girl to get her to do the shitty thing. She is then pissed at the supervisor for putting her in that position, and takes it out on the candidate.
HR might also be pissed at both supervisor and candidate that the wife's terminal cancer diagnosis has obviously not been mentionned at all during the interview process - as a candidate in that position, I would be tempted to keep quiet about it unless the cancer was so advanced that my wife had only a couple of months to live, in which case I pretty much have to 'fess up to it at an interview - "look, my wife has terminal stomach cancer, and has at most a few months. During that time, I am her out-of-hours carer so if OOH work is required, I would need to tackle that from home".
From the HR perspective, if that vital information was not forthcoming during interview, what else is there to come out, and is this candidate suddenly a bad risk? At the very least, will the candidate need extensive bereavement leave that was not anticipated during the hiring, or will this go on for an extended period because the wife hangs on for years rather than weeks/months (not likely with stomach cancer, but that is not an evaluation HR can make). It should still be handled professionally and with compassion, rather than by going postal on the guy, but the interview and candidate evaluation process is the stage where all such issues need to be raised.
On balance, and from my experience as a supervisor and working with HR, I would say that the supervisor was probably being honest and that the HR woman was either being a bitch or was pissed that the limitation didn't come out during the interview stage and just did not handle the situation well.