I'll have to take your word for how Instagram has developed, since I have used Instagram for a total of about 15 minutes, and found it confusing and unpleasant. And it's definitely a good argument for expecting them to shift ground and go for what's left of Reddit, (maybe after they've mopped up what's left of Twitter, which might not take long, since Twitter is busily mopping itself up).
When I say "Instagram in a Twitter skin," I'm going off articles saying that Threads uses Instagram's algorithm, which seems a little less likely to change than the user interface/general style...? I can try to find my exact sources, if you like. It seems like Meta might have business justifications for adding a separate Reddit-replacement service, though there could be equally strong reasons to morph Threads for that purpose. I'm morbidly interested in seeing how it develops.
Being an asshole who doesn't care about user experience doesn't mean he's not also an idiot and/or trying to hide evidence. I personally agree that the "hiding evidence" in general thing is unlikely, and that deleting all conversations in order to get rid of just a few is extremely unlikely, but I think "idiot" is supported by evidence.
Huffman has actually said publicly that he is inspired by what Elon is doing at Twitter, which, at best, suggests that he doesn't read the news. I don't think there's anyone who thinks Elon is doing a good job except Elon, and there's concrete, objective evidence that this is not true. So unless there's a "getting paid to destroy Reddit deliberately" conspiracy (I have yet to see any convincing argument for that), there's something wrong with the way in which Huffman evaluates information and makes decisions. I won't insist on "idiot" for that kind of lack of brain operation, and you're probably right that there's a pragmatic reason for deleting user conversations,but asshole alone doesn't cover Huffman's recent behavior, IMO.