Everyone wants a winner on the day, and if the votes are pushed back it goes into 'hanging chad' time, which some appointed judge can just decide if the votes are included / the winner.

No, the verification they're doing is on the sending side, not receiving. The state sends people ballots, the USPS intercepts them and sends them back to the state if they find an issue.

IF this cycle of delays lasts long enough, then some people never receive a mail-in ballot, or receive it too late

They only tested 400 out of 10,000, so there’s every chance when it goes back there’ll be another reason to reject it. You’re also assuming that the government’s data is accurate and the rejections are not disingenuous. If the ballots were actually accurate the state now needs to go through the process of proving that particular voter is eligible. Do state elections departments have the time and manpower to do all of that for however many get rejected? The goal is clearly to waste as much time as possible so the ballots don’t arrive on time.