Earlier quoted context omitted.
I just don't understand what PWA's have to do with any of this. There is nothing that a PWA can do that a regular Chrome window would not be able to do. Apple is being force to support the latter. What's wrong with continuing to support the former? If it all boils down to "Apple users expect Apple to have control over everything, and if that expectation is violated, it will be really bad", then I'm sure EU regulators…
The Apple FAQ itself answers the second side of this. If a browser can add PWA, they can claim they’re installing an app, and it would not be clear to a user that they have a web app, not an isolated app. Now, none of these pseudo apps are guaranteed to be sandboxed from each other but the user cannot differentiate between apps that do provide security.
One webpage accessing the resources and data of another webpage is among the most basic of things globally known to be disallowed. This sandboxing reasoning is extremely bad faith.