>- Dynamics upgrade licenses are not cheap and it's unpleasant to be locked in to MS
>- It was going to take the dev about the same # of hours work to update his customizations for the new version of Dynamics, as to rewrite the entire solution in Java
>- The dev wants to sell the app to other customers, and doesn't want the high cost of Dynamics to be a barrier

That's happening quite often now.
We recently replaced major portions of two packaged accounting systems with custom .NET systems and I'm working on another.
The customers are still using the packaged accounting system for basic accounting, but all of the other modules have been replaced with custom .NET code that interfaces with the accounting modules. In one case 2 users are now using a system that was once used by 50 people. The rest are using custom .NET modules.
At one time, customization of the base system made sense because staying within the technical framework of the base system was better than most other options.
That's no longer true in many cases.
.NET/SQL Server is a strong, economical framework that is well supported. Combine that with higher user license and upgrade costs for the base system and replacement makes sense as business needs change.