Mangle a license, get confusion
When they decided to knit together a frankenlicense, they created a lot of really unclear stuff. Unfortunately, I don't think the court interpreted it incorrectly, and perhaps though I don't write contracts, the FSF could have written it better.
The problem is with relative terms. The clause that says you can remove restrictions starts like this:
"Additional permissions" are terms that supplement the terms of this License by making exceptions from one or more of its conditions.
The problem, which is repeated frequently throughout this section, is the phrase "this license". Someone can argue that "this license" always refers to the AGPL3 in its original form, but it's also somewhat easy to argue that it instead refers to the license you are looking at that contains this clause. And in that case, the restrictive clauses in the license would have been an original part of "this license", and therefore could not be removed. For an analogy that's not direct, it's like saying "You may take any object that wasn't in this room" and letting people sort out whether you meant "wasn't in this room when you came in", or "wasn't in this room when it was constructed, meaning every object that wasn't built in place". I think the FSF could have made this work by replacing "this license" with the specific name of their license, but if they had, that part would probably have been deleted.
Don't misunderstand me, I don't like the sneaky way they've manipulated the license to mislead users of the software. However, I think the court is probably correct in its decision that they can write new terms into a contract and apply it to code they've written.