So it just obsoletes them for the model users that buy ebooks from Amazon and put them on their Amazon device without conversion in between. Even though this user group should be Amazon's favourites.
The specific devices impacted by this are pretty old (I think only the first and second gen ones? So at latest 2009), so honestly I doubt they're very worried about it.
Profitability as reported by companies, especially tech companies, is complex. Also understand that most of that 20 years (assuming that is an accurate statement) was the era of venture capitalism and infinite funding.
But yes. Amazon did spend decades inventing and taking over e-commerce.
But that is not what you described. You described a "bait and switch" which implies that they designed the old keyboard kindles with built in wikipedia support as some long con to get around the eventual invention of a de-drm plugin for the eventually invented Calibre library manager.
The reality is that this is just a case of locking down walled gardens to take advantage of market share. Everyone is doing it. It isn't some deep conspiracy and is more just the logical end result of a walled garden with large market share.