I think the seller may well be in good faith, after all they needn't have said any of this, but my understanding of the legal position is that the original owner may still be able to reclaim the bike if he comes forward.
The seller says he has no documentation from the police, he just made a note of the dates and times when he phoned them to report that he had the bike and then later when he phoned and they told him he could keep it. The weakness of his position compared to BenR is that he has no evidence that the bike had been abandoned - it was only there maybe 2 hours and it was in such a good state that after tightening a few cables he felt able to ask £450 for it.
I guess as far as the police are concerned, if they made a record of his report then they would have been in a position to tell the true owner where the bike was if the owner had reported it stolen. In both cases, the best evidence that the bike really was abandoned is perhaps that the true owner didn't go the police and report it lost/stolen.