I think it's a classic example of landing in that space of being a feature vs a product. I know from my part, I'm really fatigued on the SaaS model of spinning up so many different products from so many different providers for one freakin' project. So Partykit, while interesting tech, may have just struggled as independent infrastructure.
Partykit is actually powered by Cloudflare Workers, so it's a compatible acquisition that adds realtime to the workers platform. Plus like you said they had recently and unfortunately "stripped PartyKit way back" with some layoffs, so I'd imagine the acquisition was fairly cheap for Cloudflare.