Well, as Peter Cook once said, "Oh dear. Oh dear, oh dear. Oh dear, oh dear. "
I never met Welles so I can't provide any real insight, only guesswork. Ray Harryhausen, I can state with warm pride, happens to be a friend of mine, as well as a hero. While I'm loath to indulge in amateur psychological sleuthing, there are a few inferences I've drawn which might nibble at the edges of the truth.
F FOR FAKE was screened for investors at, I believe, Paramount shortly after its completion. Somehow, as a UCLA student I got in to this rather large screening and was surprised to see the EARTH VS. shots included. I confess I wasn't as impressed by Welles' achievement then as I would later become...I was hoping for a dramatic narrative film in the TOUCH OF EVIL style: Welles was probably ahead of his time, but he was definitely ahead of ME!
Anyway, he framed the use of the UFO footage in terms of "how silly" an alien invasion would look if actually shown, rather than left to the radio audience's imaginations. In that context Welles' use of the Harryhausen footage seemed to be a deliberate slam. As an admirer of both men I was puzzled & affronted, like a kid watching Mommy and Daddy fighting.
I don't think the Harryhausen footage was a random choice.
Here's anecdotal evidence: Welles had actually agreed to appear in a Harryhausen picture a short time before. A July 1972 Variety announced the commencement of production, in Spain, of SINBAD'S GOLDEN VOYAGE, With John Philip Law...and ORSON WELLES. Great! Reading this was a thrill, I was out in Flagstaff doing summer theatre and the idea that Welles was going to be in a Harryhausen picture was ample indication that the stars were aligning in the heavens with the sole purpose of making little Randy happy.
When THE GOLDEN VOYAGE OF SINBAD came out a few years later, there was no Orson.
According to Ray, in a conversation some years later, Welles had waited till the week before shooting and then doubled his fee, and producer Charles Schneer told him to go to hell...so Robert Shaw wound up playing the part, uncredited. But Robert Shaw wasn't the VILLAIN... he was a mysterious poetry-spouting ORACLE wearing ram's horns.
That's all I know. The rest is fevered conjecture. If the following is too boresome or silly, picture the events as a "CSI crime reconstruction", full of flash pans and soundtrack whooshes and trucks-into faces and FX shots of alcohol being absorbed into bloodstreams.
I figure that Welles read the script late and saw that he had to speak a bunch of portentious exposition from behind several pounds of goat makeup, & figured that the only war he could get out of it was by asking too much money.
Maybe he even roped Robert Shaw into it.
Maybe Robert Shaw got drunk and burned down Welles house in Spain as revenge.
Maybe the above is ridiculous (of course it is...what I MEAN is that maybe it's not true). But hasn't it al the elements for a nice showy/cornball/awful CSI montage? Hmmm?
Anyway, I think maybe Orson was getting back a little at the man who wanted to fit him for a Ram's horn helmet.
But it's just a guess.
Oh. I just re-read your post. You requested any GERMANE comments.