Is it bad policy? Yes. Does it allow for flexibility in a world that is never black and white? Also yes. Honestly, if there was a better solution, what would it be? The questions are endless once you start down this rabbit hole.
When some content is banned from Youtube, it's got positives and negatives. Like when Alex Jones was banned, I was annoyed that I could no longer watch Alex Jones on Youtube if I ever wanted to, but more than that glad that he'd never appear in my autoplay or recommended videos. While I think there is some truth that YouTube can do as it likes, people talking about what their rules are, complaining about them, lobbying Youtube even, is all fair too. A fair complaint would be that the user does not get enough control over what gets recommended. If enough people are talking about that issue, it could motivate Youtube or a competitor to provide that kind of control, as it would be a signal that it would attract an audience to that platform and keep them engaged if recommendation control was a major concern of theirs.
Also, in some circumstances I could be quite annoyed with Youtube for not demonetising or banning some content. It could be something I don't want to watch personally, or more likely something I feel disgusted by such as Elsagate type scandals where the 'protect the children' type argument or instinct in my opinion or feelings override free speech concerns.
People criticising what Youtube does and talking about what a video hosting website would ideally do helps to create the conceptual foundations for the ideal video hosting website, and which Youtube and anyone else who reads the comments can use.
Also, discussing how such a system works produces what would be considered 'prior art' when it comes to patents.
The only problem is that your ideal video hosting website doesn't work. You won't:
a) Get enough users because most people want moderation.
b) Raise enough revenue because most advertisers want moderation.
c) Be able to legally operate because most legislators want moderation.
Ideally I would have control (which I can delegate) over moderation rather than someone I disagreed with, and not have to spend much time or effort on moderation either.
Training and/or fine tuning my own moderation AI would be a useful feature.
Communism never succeeds past the first (maybe second) generation before corruption takes root. Same with obtusely vague terms of service and privacy policies. Google circa 2003, awesome. Google circa 2023, not so sure anymore
If you want to deal with Youtube, break them in a way that promotes competition instead of having the largest ad company also owning the largest video company. Trying to otherwise restrict their rights has many other bad outcomes for all businesses and individuals.