I agree.

On this specific case: Now that some clear rules (well, at least comparatively, in the UK "case law" sense) have been established, mass downvoting is a bannable offense. However, the new account (even though it was identified as the same poster) didn't show any signs of "causing trouble" in the "bannable offense" direction. No justice was served. It was a veteran, probably someone whom LW means a lot to, trying to keep that aspect of his life somewhat intact. I have no special bond to the guy, but he did contribute a number of quality comments over the years, that much I remember. There is no indication he hadn't learned his lesson (about mass downvotes).

This is a decision for a mod to make. It's not a cry for help because something obviously bad has happened and urgent action is needed. I disagree with public shaming on principle, but in a muddy case like this, it's especially abominable, in my opinion. It's a sort of vague justice porn by someone who "really dislikes people skirting the rules". Skirting, not even breaking! Queue the denunciation! Coming close to Godwin'ing myself, here.

As you say, it can all be seen as a tradeoff. The scales would be weighed differently if this community weren't so small, and the frequency of new topics so low.