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Given the well documented history of Google making absolutely dogshit product decisions, I think it's the former. In fact, I don't even need to think. Google already explained their reasoning. They had several different communication products (including Talk) that couldn't be integrated together. They wanted the services to work seamlessly to try and compete with Messenger.
Sure, chat was probably popular. However, I bet that 99% of their chat users never cared about XMPP compatibility in the first place. When you're a product manager at a billion dollar megacorp who's aiming for a promotion and you have a choice between making 1% of your users sad and massively simplifying the complexity of your new project... you pick the 99%
As for the article, I think this is generally PR and corporate speak. Whatever their reasons were, they apparently didn't shut down the initial XMPP servers until 2022 so it was a reliable technology. There "simplification" was bringing users into their ecosystem to more easily monetize their behaviour. This goes along with your last paragraph, at the end of the day the corporation is a for-profit organization. We can't trust a for-profit organization to have the best of intentions, some manager is aiming to meet a metric that gets them their bonus. Is this what we really want dictating the services we use day to day?
Sure. They probably had one client who paid them a pile of money every year to keep it live. If there was some plan to extinguish XMPP, surely they wouldn't have kept it around for so long.
Sure. The solution is simple: don't use corporate platforms. The way to prevent what happened was not for XMPP to block Google. It was for people to not switch to Google in the first place. Google Talk released in 2005. This was absolutely back when everyone still believed "Don't be evil".