Saying "there is a decision by Reddit that I don't agree with, so I am going to take my entire community hostage in my fight against it" is definitely a sign that the mod needs to be replaced by someone more suitable for the role.
Mods should be servant to their community; and not use them for whatever purpose they see fit. It's a thankless, ungrateful job. But here is the trick: no one is forcing you to take it. If you think Reddit changes are the straw that broke the camel's back, and that it's not worth it anymore you do have an option: step down.
But taking a subreddit private decease of this is basically saying: "I'd rather have no community, rather than have a vibrant community with someone else in charge". It's a clear sign you should be removed from power ASAP.