I absolutely disagree with you.
After the station failed to identify the problem (btw I am not aware of the rule you mentioned at swiss), the MdC had rightfully one thing in mind: Solving the problem quick, discrete and efficiantly. Why risk creating a scene or quite possible cause a delay by offloading the POS?

I perhaps would have upgraded the seat neighbor. Then again the POS is now close to the MdC and the MdC can now easily set him straight without everybody to notice.

Also, who says, that the POS is not the better customer than the rest of the Y-Pax, also who says that the airline didn't mess up and didn't honor a reservation for a second seat. Thanks to sophisticated seat reservation systems, often enough the second seat ends up somewhere else than the first seat.