You know better than anyone here the importance of office politics. While there's little doubt that you'll win technical arguments with this fellow, you need allies that can carry weight with him.
You're in a no-win situation as it stands right now, the way you've described it. You need allies or ammunition to change the dynamics. As it stands, if you win then you undercut the new fellow. If he wins, the company is damaged. Some creative management is needed.
Would they agree to parallel development (reduce risk, etc.)? Would they agree to a new head-to-head competion on the development models?
Why was the new fellow hired again? How can you succeeding help him look like a genius?
Shop your resume around, just in case... :-(
Good luck!
Cheers,
Scott.