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.
There is no indication he hadn't learned his lesson (about mass downvotes).
Apart from the fact that there's some (albeit weak; no one's done the database-diving to get strong evidence either way) evidence that Azathoth123 has been engaging in mass-downvoting.
(In particular, I saw some weak evidence that he did it to me -- though not on quite the scale that Eugine_Nier did before.)
I know this reeks of witch-hunting, but... I have a hunch that u/Eugine_Nier is back under the guise of u/Azathoth123. Reasons:
I don't have an axe to grind against the guy, I've only spoken to him a couple of times and didn't notice any particularly large karma hits afterwards, I just really dislike it when someone skirts the rules like that. Disruptive users evading permanent bans never helped any community ever.
Obviously I'm posting this here because I think a moderator should look into the matter. Usually I would be posting a disclaimer of some sort, apologizing in advance to Azathoth123 for attacking his standing with slanderous accusations if this turned out not to be the case. Well, I won't. The more I look into the matter, the more confident I get that they're the same person. Azathoth, if you're reading this and you're not Eugine_Nier, then I strongly advise you go search for your twin brother, I think you'll get along very well. Seriously, I'm saying this in good faith. You have a suspiciously great deal of things in common.
If retributive downvoting is (still) a concern (if not, then disregard this paragraph): I'd like to request, if such a thing is possible, that a mod karma-blocks me until the issue is over, so as to not incur undeserved downvotes (it would also mean I'd get no upvotes). In turn, I promise not to abuse the system by spamming the boards with garbage without consequences, but then again given my history so far on LW I don't think that such an abuse should be expected from me. For the record, I could have made a throwaway account just to say this, and not risk being karmassassinated, but 1) a zero karma account has no credibility and 2) for signalling reasons I prefer to put my money where my mouth is.
P.S. I only made this announcement its own post because the latest open thread was about to "expire".