Can someone comment on what is newsworthy about this?
The Google Chrome folks are the ones who decided to disallow it. You could argue that they are trying to kill it, but certainly not Google at large.
The truth is that every image format added to a web browser has to be supported forever, so chrome team is wary of adding new file formats unless its an above and beyond improvement. Jpeg XL isn't (relative to avif) so google decided not to implement. Its not some malicious conspiracy, it just didn't make sense from a product perspective.
From what i understand https://storage.googleapis.com/avif-comparison/index.html is what was used to justify google chosing avif over jpeg-xl. Jpeg-xl was better at lossless images but avif was better at lossy, and lossy is the usecase that matters more to the web.