Firing 1,000 non-contributing engineers is easier said than done. There will be enough false positives in that number that a lot of essential knowledge about the systems may walk out of the door too.
On your second point, how does eliminating content moderation boost revenue? Twitter’s revenue comes from advertisers, and they generally don’t want their ads to be shown next to offensive user-generated content. Nobody in corporate America is clamoring to buy banner space on 4chan — sites with the least moderation are also the least attractive to advertisers.
Eliminating the draconian content moderation policies and reinstating high-engagement accounts ought to boost revenue.
I think you're largely correct that this is a bad deal for Musk, but I doubt it will be quite as bad as it seems, when restructuring is completed.