It became evident after the second time though that this was very on purpose and it was known there would be an issue.
Obviously there's the "people were angry last time, they will likely be angry this time". But that's projecting personal/political views into a sponsorship.
What should have been the right course of action? I'm not sure. "Tech is easy, people are hard"
No MIC sponsoring would have been the right course of action. No matter your sympathies, or alliances in your case.
To even think of the sponsorship as a valid idea is US centric ignorance. Outside the US people don't get the "Thank you for your service" indoctrination and are way, way more reluctant to work with the MIC.
If you knew anything about Germany, the issue with the university host should not have surprised you at all. It's not some modern outrage of wokeism, it's a decades old academic foundation: https://en.wikipedia.org/wiki/Civil_clause
It's hard to find a German university without: http://www.zivilklausel.de/index.php/bestehende-zivilklausel...
Losing VOC support, eh?! Have you been to a CCC event? MIC sponsorship of Nix would lose you more or less the entire German hacker scene, at the very least.
A national defense company sponsoring an international software project, not expecting uproar... I don't know what to say. It's beyond plausibly idiotic. Objectively, completely out of touch.