If you paid attention to the Murdoch issue you'd actually realize each of your facts parallel a facet of the phone hacking scandal:
A) Your purported argument about scale really suggests that YC may have more investments than they can reasonably manage, but that doesn't absolve them from blame. This is EXACTLY the same argument Rupert Murdoch made (We have so many newspapers that we couldn't possibly be aware of hacking at one paper)
B) Your sixth fact is
6. ...even though they aren't in YC for IM, YC has no real influence or control over IM or even the team.
There are actually two parts here, and I'd like to hone into the first for a moment: "even though they aren't in YC for IM". It seems
VERY odd that PG would allow companies to pivot
without first having an office hour or discussion with partners on the matter, and if what you are saying is true then there are deep procedural issues. Murdoch tried to make the same argument regarding autonomy of the individual units under News Corp.
C) Your second and third fact focus on partners and alumni. They have additional senior staff, so how was this allowed to happen? If the partners and alumni did share the same mores as PG purports to hold now, and if at least one partner or alumnus dealt with IM, then there's an internal inconsistency (akin to blaming rebekah brooks for what is really a cultural issue)
D) Your fourth fact tries to argue that this is a single bad apple. It's the first instance being reported. Of course it's an isolated incident insofar as no other company attempted the same effort, which is exactly what James Murdoch claimed regarding News of the World.
E) " Immediately after it being brought to his attention, PG followed up with the owners and they made some changes as a result..."
The problem is that the underlying problem wasn't resolved. PG decided to point to the TOS, which doesn't address the nature of the business model. This is akin to James pointing to ATT's terms of service and security model.
I'm pretty sure that for whatever "fact" you wish to throw there's an analogue, and until there's some sort of real "accountability" I don't see how you could have such unwavering support.
My expectation is simple: if YC wants to invest in those types of firms, that's their prerogative and they should own their decision. Don't try to pull some cognitive dissonance. Just say that you are comfortable with investing in the malware model, and this entire discussion would be moot. The only reason my reply makes sense is because PG and YC claim to aspire to something higher. If we all drop that assumption, then the original issue is really irrelevant.
And with regards to your last comment: " YC explicitly looks for people doing things that might seem questionable at first.", I think you misunderstand what 'questionable' means there. Questionable there means "i doubt it could succeed", not "shady business practices".