It is amazing that you can complain about a simplified example and then both misunderstand it and get literally every single one of your "corrections" wrong.
1. As I made abundantly clear, 20% is the passive ownership of the index. It has no relation to the index weighting which you are mentioning.
2. They have to buy 20% of the weighted value. The actual weight is 5x the float. I chose to use a weight of 100% instead of a multiple of the float as a simplification since any weighting greater than the float could result in a squeeze given a large enough passive/obligated ownership pool. However, since I was expecting this sort of "correction", I chose 20% passive ownership of the index (i.e. 1/5) so that they would have to buy 20% of the 25% which is 5%, the same amount as the 5% float. This would result in the passive investors having to purchase all of publicly traded stock which is the divide by zero point that spikes the stock. So, even if your correction was not wrong, I also already countered it.
3. Tracking errors are distinct from intentionally not tracking the index you are contractually obligated to match. You are insinuating that the target of these financial manipulations will defend their clients by ignoring their legal obligations and blaming it on "tracking error". While that is possible, I see no reason to assume that will be the case upfront or to do anything other than apply blame to the entity attempting to financially manipulate retirement accounts into lining their own pockets.
4. Yes, there are other insiders with shares. I used a simplified example where there is a single insider, the founder, to highlight the power that the insiders have over the pricing in such a squeeze. However, you also got this wrong because insiders usually have lockup periods after the IPO that are longer than the 15-days expected for index inclusion. As such, the fund managers would not be able to purchase any shares other than the public shares until after the first rebalance.