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I’d wager the C Suite at Apple, at most, approved PWA support but it was an engineer-boosted project. In contrast the DMA compliance stuff is definitely driven exclusively by the legal and strategic teams.

The legal team isn’t concerned with gutting PWA feature and PWAs aren’t strategic for the company.

Doesn’t this whole thing hinge on the DMA not allowing them to favour webkit like that?

That's their public core argument.

Their real argument (to shareholders etc) is that they want that 30% rake on everything you buy, so they want you to have 900 apps on your phone instead of a web browser than visits 900 websites.