Hi Ed:
When you say "mucks his hand face up showing AK", I'm assuming he's flipped over the cards throwing them towards the muck in a folding action, but the dealer then pointed out that someone was still in the hand, and the cards are still retrievable and identifiable.
If these assumptions about your fact scenario are correct, I would simply give the AK back to the player, and direct play to continue as normal. He can proceed to bet after the flop as normal. He is already being penalized because his opponent knows what his hand is.
K