Sounds like a crappy time for your nephew. Some things don't make much sense to me here, though. I find it hard to believe that he would have ever been booked, once they started doing the paperwork. The warrant that came back to the incorrect drivers license number the officer gave would have a name on it, and unless this is the coincidence of all coincidences, that warrant and drivers license number probably have a different name than your nephew.
Also, when you called the jail, did you actually speak to one of the arresting officers, or to someone else? Pretty sad if they just outright lied about having him in custody.
As for teasing, I don't know what you consider to be teasing. I'm sure they've heard it all...particularly people trying to talk their way out of being arrested. Sounds like when they realized what happened, they were obviously apologetic, and I doubt that would have been any different had the mistake been discovered without your intervention.