Google definitely throws its weight around too much w.r.t. to web standards, but this doesn't seem too bad. Web specifications are huge and complex so trying to size down a little bit while maintaining support for existing sites is okay IMO.
No it doesn't. An HTML page constructed with XSLT written 10 years ago will suddenly break when browsers remove XSLT. The webmaster needs to add the polyfill themselves. If the webmaster doesn't do that, then the page breaks.
From a user perspective, it only remains the same as before if the webmaster adopts the polyfill. From the web developer perspective, this is a breaking change that requires action. "shipping the polyfill" requires changes on many many sites - some of which have not needed to change in many years.
It may also be difficult to do. I'm not sure what their proposed solution is, but often these are static XML files that include an XSLT stylesheet - difficult to put JS in there.
That breaks old unmaintained but still valuable sites.
I completely understand the security and maintenance burdens that they're bringing up but breaking sites would be unacceptable.
(But of course, XML Stylesheets are most widely used with RSS feeds, and Google probably considers further harm to the RSS ecosystem as a bonus. sigh)
Fortunately, Thunderbird still has support for feeds and doesn't seem to have been afflicted by the same malaise as the rest of the org chart. Who knows how long that will last.