I think it makes a lot of sense as a series of emotional reactions, mostly from spez. He won't back down and no one can make him.

They don't want to serve ads through the API because ad buyers care about exactly how the ads will be presented. The apps would have to work very closely with Reddit to ensure consistent ad presentation, which is more work for them so they don't want to do it.

The API price was plucked out of thin air, presumably based on what they believed OpenAI/Microsoft/Google would be willing to pay. Third party apps were acceptable collateral damage.