This issue is not that he used a fake rank, the issue is that he said he was in combat when he wasn't.

Both.

The deal is if you don't complete a certain series of steps you don't get to retain the rank Command Sgt. Major, you lose the CSM insignia and go down in pay to Master Sgt., 3 up, 3 down. Tampon Boy didn't complete the steps. He is NOT entitled to use the rank CSM.

As Military Justice posted in this thread, quoting wiki:

Though he was serving as a command sergeant major at the time of his retirement, Walz's final military rank for retirement benefit purposes is master sergeant, as he had not completed the required academic coursework to remain a command sergeant major before his retirement.