No rational person is going to fight a DMCA from Nintendo. Nintendo would in no circumstances not file a DMCA against a Yuzu fork. Additionally, the settlement required that all of the core developers, who would know it best, are never permitted to work on a Nintendo emulator ever again. Thus, Yuzu is completely dead.
Is it a smart idea? No; but a profitable emulator should be just as legal as an unprofitable one. But where it involves breaking digital locks, as Nintendo may successfully demonstrate, the DMCA makes both illegal.
That Yuzu reportedly has generally better performance than a Switch console couldn't have helped, either.
Making money and credible potential to eat into sales. A less litigious company would still have complained.
What does that even mean? I think you mean: "the fact that yuzu could be run on hardware that allowed it to perform better than a switch console".
Emulation, by it's very nature, will always perform worse. But the underlying hardware could be significantly better.
From my understanding, this part is not true (though it is widely touted).
There were third parties that made the necessary fixes to run the game in their own forks, but Yuzu proper did not release any fixes until after the game came out, even in the pre-release versions.