Right - I take his assumption to be "no losses to entropy"
by
In this purely hypothetical situation, sure, let's ignore the 2nd law.
But the "loss" due to the change in gravitational potential energy isn't an entropy loss, it IS actually work done on the subject material.
I think you could NOT get 10kg of lead to reappear in orbit. The laser you start with at the bottom when you convert the lead to light would have a certain frequency, which defines it's quantity of energy. As it goes up, the frequency (and energy) would get lower because gravity is working against it. This is one of the phenomena of black holes, up until light fails to escape. So, a blue laser starting at the bottom would be a little more red at the top, and have less energy, so it would convert to only 9.999999999...kg of lead, even assuming perfect conversion at both ends and no other losses to entropy.
