Even if they win, what would it remove? A website, which essentially just hosts some links to github. Within German jurisdiction only. So it would probably be up and running from a different provider within a day or two. And the repository itself would remain completely untouched anyway.
To be honest though, I don't think they need to win, just get clarity. YouTube have almost certainly committed to the labels that they do apply DRM to YouTube videos containing their content, and are telling them that the rolling cypher is it. If the labels take it to court and the court rules in Europe that the rolling cypher is not sufficient to be considered DRM contractually then Google are in breach of their contract, and will have to apply Widevine to YouTube videos containing any music.
also to note that it is companies that act illegally in preventing fair use of copyrighted content. it's a battle where both sides pretty much decided to ignore the law. since registered companies are meant to respect the law to continue to operate, and pirates, well they are pirates and prosecuted for it, if caught, I opt for the court to instead compel YouTube, and its media partners to provide DRM free content so that everyone else, consumers, can enjoy the rights granted by law to make fair copies of content. that would resolve the matter once and for good.
No, they're not. Law on copyright does vary from country to country significantly, and you're citing "fair use" (a US legal concept that doesn't exist in Europe) about a European case, but generally speaking copyright exemptions are exemptions that are defences to stop other people suing you. They are not "rights", and there is no requirement for any other party to technically or practically enable them. I can keep my copyrighted work in a room you're not allowed to take a camera in, and that's perfectly legitimate. Likewise, companies can apply any digital locks they like.
(Note in some cases there are small, specific allowances on circumvention provisions for exercising of copyright exemptions such as the US Library of Congress list, but they are generally very small, very specific, and again do not require the copyright holder to enable it, just reduce their legal back up.)
No court would ever rule the way you want it to, because fundamentally you misunderstand the basic legal concepts.
My guess is the point is to make it difficult to get videos from their platform without seeing the ads.