The really criminal thing about this is the for some users it is that critical.
So not only are they vastly overestimating how critical their service is to the average costumer; they are also totally fucking over a minority of users for whom it is critical.
I think you're dead-on.
In some ways a degraded system is much harder to fix (or even identify as broken) than an outright destroyed one.
If the IAmA mods vandalized the sub, they would get booted and replaced. But if they just stop doing anything but the bare minimum... that sub was such a magnet for traffic, it might slowly degrade traffic to Reddit as a whole.
But just looking at the data, it might be very very hard to figure out that what is driving that is the IAmA moderators starting to restrict their activities only to moderation. It degrades the experience of the site as a whole.