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I think they did, to be honest. I've abandoned most of the LW communities and I think I'm not the only one. There's enough inertia in the system that I'm sure they will still be a big instance, but the reputational impacts of things like that are often permanent.
To me, the big thing about the bias bot wasn't the enforcing of the bias bot, it was the lying. If they had come out and said, "The bot is useful for moderation, we're keeping it even if people don't like it," I don't think it would have been any kind of big deal. What causes people to have this really unhappy reaction is telling them, "People love the bot! The minority who doesn't like it is just mounting a pressure campaign" or "You just don't understand the issues involved like we do" or "We're fighting misinformation!" or "The admins are making me keep the bot" "No we're not, the moderators want to keep the bot" or deflecting into this conversation about the cost of accessing the MBFC API or whatever other totally weird irrelevant issue.
The !news@lemmy.world moderators were the ones who asked their users, got the answer that people didn't like the bot, and took it away. It doesn't have to be complicated. That's why I'm still subscribed to !news@lemmy.world when I've abandoned the other LW news communities, and I've noticed that my Lemmy browsing experience has been remarkably free of weird bad-moderation bullshit ever since. There are no friendly conversations between jordanlund and UniversalMonk. I haven't had articles I've posted get removed for totally frivolous reasons. There are no bots that every user hates and every moderator insists has to be there. It's just news! Good stuff.
Tinfoil hat time, I think MBFC bot was the smokescreen for a GroundNews sponsor/ad.
The bot started up at the same time GN started a massive ad campaign sponsoring a lot of YouTubers (~7 months ago). MBFC was the bias checker and GN was the hot new "good" source included in every single post. I bet Rooki or someone was getting checks.