See also
Doing Damage During an Inspection: It’s your Job - Misc. Discussion - InterNACHI®️ Forum
Now I’m going to give a different perspective, related to the eventual need to repair. Covering something up deliberately comes with an obligation to disclose, at time of sale. So frankly he’s screwed either way.
If he demands you paint the area, then you do, you write that in your report and he’s worse off.
Repairing something involves removing essentially all the rotted wood – rotted wood holds moisture and fungus and needs to go to effect any sort of repair.
Once the flaky crumbling stuff is out of the way a cellulose based epoxy helps stabilize and make breathable for moisture the remaining fungus infected wood (see http://smithandcompany.org/ ). 5100 Channel Avenue
Richmond, CA 94804 (Disclosure the factory is in my inspection area, and I have met the founder and toured the production facility, having used the product for many years before that).
There’s published work behind this:
Yet, there are no agreements among manufacturers, users, property owners, architects or structural engineers as to exactly what is being done, or how, or with what result. The reason for this is that there has never been any such thing as a standard piece of rotten wood. Until now. http://www.woodrestoration.com/
The “request” you got was essentially to be part of the process of covering up rotted wood for sale. Think carefully about how complicit you wish to be. Where do your ethics fall?