Can a retired SGM come onto post and act as if he was still active duty?

No, of course not. Some people just have a hard time giving it up though. The guys that still work on post after retirement, i.e. DACs, Contractors, etc are usually the worst offenders.

I remember one instance when I was a young Soldier, I had only been in the Army about 2 years at that point. I was with one of those 10-year TIS E-4s and I don't remember why exactly but some retired E-9 tried to get in his butt about something. My friend just blew him off, which really ticked off the retired E-9 even more... he says "well I'm retired Sergeant Major so-and-so"... to which my friend responds "key word is retired" and continues walking again.

There are two separate issues here, issuing directives and wearing the uniform. Regarding issuing directives, he has no authority to do that. He may have influence, but no specific authority. If leaders are allowing him to influence them, that's not necessarily wrong (although the level of influence might be problematic from a leadership standpoint and require some form of leadership intervention). Regarding the uniform, unless there are other pertinent details that you have left out, according to AR 670-1 he cannot wear the uniform in such a scenario. The regulation states that retired personnel can wear the uniform in "occasions of ceremony" that:

"include, but are not limited to, military balls, military parades, weddings, military funerals, memorial services, meetings, conferences, or similar functions of associations formed for military purposes, of which the membership is composed largely or entirely of current or honorably discharged veterans of the Armed Forces of the United States."

It also states that:

"retired personnel are authorized to wear the uniform only on the following occasions:
(1) While attending military funerals, memorial services, weddings, inaugurals, and other occasions of ceremony.
(2) Attending parades on national or state holidays, or other patriotic parades or ceremonies in which any Active or Reserve U.S. military unit is taking part. Uniforms for these occasions are restricted to service and dress uniforms; the combat uniform and physical fitness uniforms will not be worn. Wearing the Army uniform at any other time, or for any other purpose than stated above, is prohibited."

So, it appears as if it's wrong for him to simply show up on post in uniform. If he has been invited for some sort of meeting, conference, etc., it may fall into a gray area where a person in leadership may have to make that decision. That's based on my reading of the regulation.

You said reportedly, that means you do not know. Nor do you know how much leave he had built up. With deployments there is a chance he had that and more. I retired not too long ago and with all I have built up I was on the payroll for almost seven months. If he is on leave and wants to make corrections in uniform he can do so. Now, if he is officially retired and you have more than speculation, whomever he corrected to speak with the current CSM. It would be a mighty bold move of home to do this. Unlikely at best.