You state this very well and I agree with everything. It is a mechanism built into the system to all for decentralization. What you are witnessing in the wild west in a way as we are still new like the old west was.
In reality fulltimegeek has so much power it scared him and so he delegated it to others for the good of the community. He tried to do it right and recognized the harm of having too much power.
Unfortunately the bad guy here doens't have the same ethics and only cares about himself. Therefore there is only one solution, and that is the people with power have to either agree or not. They don't so there is a policing mechanism call "flagging" and that is what will happen. The problem with using flags is the other can hit you back. And this bad guy got so powerful that no one could challenge him any more...
Until today
fulltimegeek is bringing back the power that he has loaned out to people to get system back in balance. That is what is meant. The reason it is phrased as a war is that the bad guy will fight back and try to keep fulltimegeek from stopping him. No blood will be shed, but the future of the platform rests on the outcome, because if fulltimegeek loses then the bad guy will be unstoppable.
So your last question about governance is a good one, but the founders of the platform believed that good will win out over evil... We will see, but I think they were pretty smart to enable someone doing bad things to be stopped by the community at large.