I completely agree with you, it is completely absurd what Nintendo is doing.
Unfortunately, Nintendo does not care what you think, does not care how this hurts their image, and does not care what damage this causes to the emulated longevity of their games lasting longer than the hardware they sell currently.
It is in their financial interests to force everyone to always pay for and buy Nintendo hardware to perpetually keep having to upgrade and purchase new copies of their software from their online stores to keep playing old games.
This is how they do business and by having articles, news, and social media posts constantly crying about how Nintendo did them wrong, it helps ensure that the average person keeps toeing the Nintendo line instead of exploring emulation. If a non-tech savvy person hears "Nintendo sued a guy for using emulation on his game meetup" they'll think, "eh, I think I'll just buy a Switch and not bother with emulation" when they want to play Yoshi's Island because nostalgia hit them in the feels.
This whole thing is a song and dance to keep people buying real Nintendo hardware (or choosing to use already owned Nintendo hardware) to play games they could just emulate with a few quick downloads. It's why you see "Top 5 retro games you can buy on Nintendo eShop before it's gone" articles on Polygon and elsewhere every year. It's a whole schtick to get you to keep handing Nintendo money for a game you've likely already bought and paid for at least once in your life.
Once again, I don't agree with Nintendo's stance, but boy oh boy is it ever profitable for them.