Maybe when he has to stew in the residual morass of his stupid suggestion, he'll come to realize how bad it is. You're the writer. This is always trouble. Don't blink, don't cave. Let him know you're speaking off the top of your head and work with him as you spitball where this damn script is going to go.
Nothing has to come of it.
Just make sure he experiences with you the difficulty of having to deal with his dumb note. Its futility just might sink in and you can chalk up another win. At the least, just because they're the producer doesn't mean you can't make them suffer a little. He'll unconsciously feel that, but will never blame his own original note for it. You'll get the blame.