My hat's off to Apple PR on this one: they came up with some spin for why they were adding a malicious component to how they are complying with the DMA.
They're likely not lying when they say that it's more difficult to maintain their security standards while at the same time allowing any browser engine to run PWAs. But this is a problem they absolutely could solve, and a company with Apple's size and skill absolutely has the resources to make this work. But they've chosen not to.
Another option would be to actually engage with EU regulators on the issue, and see if they could carve out an exception -- temporary or otherwise -- to allow them to require PWAs to run under their existing WebKit-based framework, regardless of the default browser. But they've again chosen not to do that.
PWA adoption is likely as low as Apple claims. I think they're toeing a line here: because Home Screen Apps are a bit of a niche feature, they can break it without pissing off too many users, but also give a subtle middle finger to the EU. "Poor Apple users, Apple just has to disable a feature some people like because of the evil, overreaching EU and its burdensome DMA!"
This is a shame in that I personally think we all should be relying less on mostly-closed-source, proprietary apps for everything. While the web platform is a bit of a mess, it actually does (or could) offer the same functionality that native apps do, especially if Apple and Google had worked on that sort of thing over the past 15+ years rather than pushing native apps so hard. We'd be in a much better place if that were the case: consider the savings in time and money if every company out there could just write a single PWA and not have to build two completely separate apps for iOS and Android. (Yes, I know there'd be some extra people dedicated to fixing issues caused minor but significant-enough differences between the platforms, but it'd still be a ton less work than two apps for two different platforms.)
Also consider how much easier it would be for other smartphone platforms to break into the space, if all existing apps (as PWAs in my imaginary smartphone-utopia) would run on their platforms without much work. A big reason I will likely never adopt an alternative smartphone platform is because none of the apps I rely on day-to-day exist on them. Even though I'd absolutely love to ditch Android, but don't consider iOS any more palatable.
Anyway, that ship sailed a long time ago. I'm still bitter about it, though.
Ultimately this won't matter much. The number of people using PWAs on iOS is probably a rounding error. Restrict that to only people in the EU and it's even smaller. But Apple still gets in a jab at the EU over this, and most affected users will likely side with Apple on this one.