They had to do something to halt the death of a 1,000 PR cuts that was occurring at least a half decade prior to COVID. Everyone seems to forget that despite being a decent year economically, 2019 was horrible for Orlando theme parks. The preference cascade had started.
That GAC lawsuit makes clear--lines are the biggest driver of guest satisfaction. Up to 15 minutes is ok, over 20 scores go downhill fast. Lack of new attractions (especially people-eating omnimovers) is the biggest cause of that, but FastPass a strong #2. They admitted this in the lawsuit. FastPass in its existing form needed to go. If anything, this is softening the blow, not totally destroying it but still leaving a pricey alternative for those who want zero lines.
It's ultimately a problem of perception. Many guests saw FastPass as a good thing, but the 15 minutes they saved for one ride turned into an extra 30 minute wait elsewhere. Universal became a much better park when they ditched their pastiche of old school FastPass for the current paid system in the early 00s. Long term, I imagine this will do the same for Disney.