It's just marketing to be like "look at how capable our AI is with just one button". I mean if you want to be charitable it's an interesting design exercise, but wasteful and frivolous when everyone is already carrying devices that are far more capable supersets of this.
I think it would be too big of a privacy overreach to try to ban it outright as I think what people do on their own computers is their own business and there's no way to enforce a full ban without being incredibly intrusive, but as soon as it gets distributed in any way I think it should be prosecuted as heavily as real non consensual porn that was taken against someone's will.
so what exactly are they doing wrong besides providing service to potentially questionable companies?
Well I think that is the main point of what is wrong. I think the big question is whether the mature content toggle is on by default or not. The company says it's off, but some users said otherwise. Dunno why the author didn't install it and check.