He lent it to you, so what's the problem with him asking for it back? Is he upset about the modchip? Or is it because it's modded now that he's taken interest in it again? Either way, it is his..
That said, why not just buy him a brand new wii? I'm imagining the problem you're facing is you don't want to just give him the wiikey, and of course he never asked for it in the first place, so he won't pay for it. And the wiikey won't work with d2c.
So really, wiikey's aren't that expensive, so if you must part with it, whatever. He's family. Or buy him a new wii. Then he wants to have it modded, that's his own money.. Besides, new system for him. Then he can't blame you if it breaks. Vs now, if it breaks a few months down the road, he'll probably demand you buy him a new one anyway..
Or buy a new wii, rent a wii from your movie place, and swap out the drive. Chances are, the rental wii's have old drives.