My feelings on this are complex, but TL;DR: the policy is correct and overdue, but the execution is clumsy and overblown at best, malicious virtue-signaling at worst.
It is, as a matter of principle, not acceptable to look the other way when players cheat, no matter the presence or absence of direct effects on other players. There are some reading this post now who feel compelled to dogpile in situations in which someone they see as less worthy than them was receiving an unearned reward and has been caught and strung up in the public square. I’m not addressing those people. I am instead speaking to the people that recognize that this is a far more nuanced situation—one in which Blizzard has made a striking course correction in the right direction, but with collateral damage that just might have been (properly) avoided.
The Timewalking Mage Tower only offers cosmetic rewards–very nice ones, but not advancements in player power nonetheless. This was most definitely a factor in some players’ consideration of whether Blizzard would “action” their accounts (making it seem less likely). The most obvious opposite kind of situation in WoW terms I can think of is buying gold in Classic to bring to GDKPs to get more powerful items to take into PvP to smash other people with, not to mention inflating the economy and driving more players to buy gold. Mage Tower cosmetics do not even present the threat of fraudulently indicating the player’s skill to others because of how poorly it was tuned and how well-known boosting is.
There is no real threat to balance here. When I’m giving in to cynicism, my view is that it seems that Blizzard just understood that this community can, at times, be little more than a crab barrel and they decided to cash in on it. Cite the vaunted Terms of Service all you like, but Blizzard reserves the right to refuse access to your account for any reason or no reason at all as a part of their legal CYA. Whether or not tolerating this kind of player behavior is a good idea—which I will remind the reader that I believe that it is not a good idea—this still can hardly be held as consistent with Blizzard’s past behavior. I imagine a great many of these players would have thought twice long and hard about whether or not to do this had they any expectation this kind of hammer might come down upon them.
Moreover, this action isn’t even consistent with itself, if the principle involved is whether the cosmetic rewards were earned. When the Timewalking Mage Tower was initially released, there were some tuning issues (of which I assume most readers here are aware) that favored some players to the point the challenge was largely trivialized. Blizzard resolved this by applying hotfixes but did not require those players that exploited these tuning issues to earn the rewards a second time under fairer conditions—let alone actioning their accounts over the issue.
In addition, in response to a public outcry concerning the incommensurate difficulty for some specializations and the time needed to practice and grind out optimal gear for the counters, Blizzard made a second tuning pass and extended the duration of the Legion Timewalking event by two weeks (see: Mage Tower Availability Extended and Tuning Adjustments). Unfortunately for those players that felt rushed prior to this announcement, there was no way to undo having earned rewards through illicit means and attempt to earn them again fairly. Instead, they had already unexpectedly set themselves up for this account action ex post facto. I remind the reader that the literal language of the Terms of Service should matter much less than Blizzard’s past track record of its enforcement when judging fairness since it is worded in order to maximize Blizzard’s prerogatives to say nothing of its responsibilities.
Given all of the above, was removing the ill-gotten gains justified? Absolutely. Was a thirty-day ban justified? In a world in which Blizzard’s lack of tolerance for such things, timely processing of PTR feedback, and reasonable tuning of time-limited events was established in the public mind? Yes. But, do we live in that world?