This is once again a prime example of: The party had actual reasons why they kicked him. It's made to look as if it's unjust, but it doesn't really look like it. Now the fact that they've been following the MCs calls with regards to the light, it would suggest they don't have any scouts or rogues in their ranks. For all they know, MC could be making up the light and they could have really just gotten lucky over and over again. He could be saying the truth, but they have no actual evidence. Trusting the MC with navigation, when he isn't a dedicated scout is already problematic. They should hire at least one scout for such purposes and rely on their insights. Navigation is not the role MC should have in the party. He is a swordsman, his duty lies in fighting. And that brings us to the second issue. MC is actually weak without the powers of the sword. We are talking about a hero party. All members should be to-notch or really talented and growing rapidly. They should have comparable strength to the elf. Now MC was much weaker than the elf and he has been in the party for some time. He has not grown significantly during that time obviously. Not in regards to the sword (his greatest asset) at least. So for the party, he is severely lacking in strength. And while he has potential, he hasn't shown signs of being able to harness it in the future. So it makes perfect sense that he would be fired from the squad. In a profession where one fights dangerous beasts constantly, such stagnation at such a mediocre level is simply not enough. This could lead to death. Most likely that of MC btw, since he isn't strong enough to actually fight the battles the party needs to. So it's also in the best interest of the MC to leave the party.
Point is: The decision of the hero is completely justified and in the best interest of all parties concerned. The later powerup doesn't change the fact that it was a good decision at the time. If he would showcase his power after the powerup, he should be then taken back into the party.