It’s because Yuzu was profiting off of their development with a Patreon. Keep emulators FOSS and there’s no profits to claim.
Also, because it’s a settlement and not a ruling, it’s not setting a precedent for future lawsuits. Courts historically put a lot of weight on legal precedent, to help make rulings consistent. If one court interprets a new case in a certain way, similar cases in the future will likely look to that first case’s ruling for guidance.
So if one ruling had decided that emulation is illegal, then subsequent lawsuits would have been much much easier for Nintendo. Because Nintendo could basically argue “we already proved emulation is illegal in that previous case, so now we don’t need to do that part again.”
The scheduling demand thing is referring specifically to the project manager going “we need this for an upcoming major product launch, so you need to fix this before the launch.” It feels like Microsoft cracking the whip to try getting free labor, because it is.
If they truly can’t do without it for their product launch, they can fork it and fix the bug themselves. Surely Microsoft has the resources and brainpower to do so. But the PM didn’t want to do that, because it means they’d be spending their own time and resources on it.