When it comes down to it, it is a matter of whether or not the consumer is likely to be confused by the usage. King's statement seems to say that it is the combination of the usage of the 'Saga' suffix and a similar game mechanic that would give rise to confusion.
The question therefore arises as to what should be done with the 'Banner Saga' application. If King let it go, then this could serve as evidence that they are not concerned about the 'Saga' suffix. If they oppose, then they are seen to be attempting to take control of the 'Saga' suffix regardless of the game mechanic it is applied to.
The main problem is that the trade mark application would be unlikely to specifically identify the specific game mechanic that will be used. It is more likely to include reference to 'computer games' for example.
If King therefore let the application through, 'Banner Saga' could potentially be used with any game mechanic (and therefore serve as evidence that any game could use the 'Saga' suffix). King could have taken this approach and restricted Banner Saga's use via a coexistence agreement (mentioned below)(or by amending the classification), but negative PR aside, there is not much incentive for them to do this.
Further, although they could rely on the above strategy of showing confusion via a similar game mechanic AND the usage of 'Saga', this would be more difficult to prove if they permitted the registration. King are in a stronger position if they are able to say they are actively opposing applications, even if in certain cases this will result in negative PR.
On your last point, companies often enter into coexistence agreements, acknowledging that both parties can use an identical or similar marks (registered or unregistered) but under limited circumstances. This could be the case with Banner Saga for all I know...