IF I were the arbitrator of this situation here is what I would say:
Wraithlord won the game. There was no sinister cabal at the start of the game to give the win to a single player. Wraith managed to score the ultimate diplomatic victory either directly or indirectly over the course of the game - a player was persuaded to give their VPs up. It seems there are enough differing opinions on this that nobody in this game thought they were doing anything wrong.
I don't believe that giving your VP to another player in a VP game should be allowed in the future. Given the differing opinions and resulting confusion, it is something that needs to be explicitly stated as to whether it is allowed or not. I would strongly suggest prohibiting it in the future (I will do so in any games I start). To take the argument ad absurdem, imagine playing a year long game, being in first place, and then suddenly in a single turn you lose because a group of players have opted to give their VPs to a single contender. This would not appeal to most players. However, if you like the idea of an "allied victory" then this should be clearly stated. While I failed to convince Squirelloid, I think most people can see the distinction between gifts, which can serve strategic purposes and help balance the game, and suicide.
Because there was no prohibition in this game and it is clear through the healthy discussion over the issue there are differing opinions, I would bless WraithLord's victory - he got the win message and broke no explicit rules. I think Archaeo has raised totally valid concerns that should guide future games. I completely understand his frustration - he invested long hours over many months and was a hair's breadth from winning. Why bother to spend all that time if, for whatever reason, a player decides to surrender his VPs to your enemy? I see Arch as a victim of a precedent - I have never seen someone give a VP away, so its never come up before. But when you consider there are players from all over the world, with different mindsets, it is understandable that there would be varying views on this topic. I'd ask Archaeo to let it go (then I'd duck
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Then I'd say, life is short and relationships are more important than a game. Both Arch and Wraith are valued members of a cool, small community - lets have a beer and get on with things.