By making TLS mandatory you not only break local dev environments (that use that TLD which maybe have a legitimate domain outside of your network) you also make it so that it’s not even possible to run locally unless you do a lot of CA trickery to get a legit looking TLS cert.
My personal opinion was that this was a good move, as it forced developers to stop using .dev as soon as it was being used on the global internet- which avoided a lot of really awkward and annoying dual-home misconfigurations.
They were aware of the issue, buried it in the report and reneged on their promise to keep it internal-only. That was the mitigating argument for allowing it despite the known existing usage. Google acted in bad faith and I'd need to see concrete proof to convince me otherwise.