You have two basic options: try to enforce the policy or keep the project going full steam. You can't have both.
Your developer is doing a stellar job for you because (a) he works for you, and (b) he's personally committed to the project and has good morale. Either of those can change at any time, and you don't want them to change. A top developer can always get another job fast.
Telling the developer that he must be in the office three days a week says that you value compliance more than getting the job done. If you, the release manager, make it clear that compliance with policy is more important than him getting his work done, you're telling him that his work is secondary, and that's going to affect his morale and productivity. Any hint at discipline is going to give him the feeling that he's likely to be punished for doing his best job. So much for incredible productivity, and I wouldn't bet highly on him continuing to work for you.
I don't understand why anyone would put together a 20-person software project with at least eleven managers and only one developer. That means that, if something happens to the developer, the project is screwed. The "bus factor" is one. With about a dozen managers, you will almost certainly have one or two of them who think that interrupting developers for minor things makes no difference. The odds are that the developer can get things done in an outstanding manner only because he works from home.
It sounds like you haven't tried to find out why the developer wants to work from home all the time. If you're thinking of taking any sort of action, you need to understand that first. I don't think it's a good sign that you don't mention having tried to find out the reason, or that you don't seem to be trying to understand it from his point of view. This suggests that you need to proceed with caution when dealing with him.
So, if you want the project to succeed, you should be thankful that your developer is only violating company policy in a minor way, and you should try to shield him from policy. You can advocate changing the policy. Somebody's probably got formal authority to bend the rules. You can probably continue to let it ride, letting him concentrate on getting his work done. Figure out something on that basis.
Alternately, you can let the project fail or at least take a lot longer than it could. Choose wisely.