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Honestly I don't think you have any options except to deny them the 1099 status. It's really unfortunate and I feel bad for them, but you can't take this big of a risk.. it would create massive problems for your company if you were ever found out. It's just not worth the risk
Did they provide a valid W-9 previously?
If they can provide the proper documentation, I'd allow them back in 1099 status. If not, continue to follow USCIS rules. If they can't provide anything and you allow them in 1099 status you can be liable for any penalties.
Pro
You can't demand work authorization documents from a 1099 contractor.
Pro
So, they couldn't provide proper documentation on the day they were to switch to FTE and now the assumption is they aren't authorized to work in the US at all? Your choice -- you can choose to assume that the person isn't authorized to work based on that one interaction OR, assume they simply didn't have their documentation during the 3 day window and are otherwise fine. Don't overthink it.