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The USC can of course, use a DL to prove identity, but, what about the foreign Fiance?
Her DL?
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Without a passport, what else can they present for identification?
See above, or whatever else she may have, probably easier to use something with a picture.
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This is a critical problem for the OP. Even with the new passport, there is no proof of legal presence in the US.
Hence the need to apply for a duplicate I-94 which evidence's that.
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He will need to get some serious attention from USCIS, perhaps with an Infopass appointment, to revalidate his Fiance's authorization here.
Serious? Why?
Revalidation of what? Just needs evidence of legal presence - I-94. The critical issue is its need when applying to adjust status.