You said keep it simple, but its not.
1st question, how can they do it, easy as stated above (that was a correction to my error), the AF is not lowering your VA rating, they are lowering the DOD rating, the law states that during IDES, the AF (dod) has to apply the VA rating. However during re-evals it reverts back to the old system, where they still use the VASRD as a guideline, but they apply their own rating-regardless of the VA-one should be able to fight this via a formal board, especially if they have enough evidence to back it up-like continued counseling notes etc. and of course if your VA rating has stood at 70% or higher.
2nd question-money. IS your extra money from the AF due to lenght of service (i.e. you did over 20 and get concurrent receipt) or is it due to the difference in what your VA percentage pays and your DoD percentage pays?
IF its the latter and its the difference, then yes you will be taking a pay cut, if the DoD is paying you at 70% of your top 3 and you get bumped to 50% of your top 3, then you will be loosing 20% of your DoD pay, if it is no longer higher than the VA pay, then you will be getting nothing from the DoD.
Appeal, fight, appeal and fight soem more UNLESS your condition has improved. But as has been stated on here multiple times, if when they placed you on TDRL, you basically popped smoke and quit going to counseling, quit taking medications, etc. and are working a full time job or attending school as a full time student in residence, then you will be moved down to the 50% mark because MH/BH conditions are based on social impairment, if you have more or less reintegrated into society, then you have improved. I am not judging or being condenscinding as I do not know your case or you in the slightest, I am laying out facts of how they evaluate from what I have seen in 2+ years of being here.