As nice as lifetime status might be for an individual receiving it, giving priority to people who no longer earn it wouldn't seem to be in the best interests of other customers or a great thing for the airline.

Think about how this plays out. As a current elite member, I get the privilege of competing with somebody else for upgrades. As an airline, I need to provide special privileges to someone who might choose to take an occasional flight, but is possibly no longer much of a contributor to the bottom line. In fact, earning lifetime status might actually encourage some passengers to earn status on another carrier because they've got things permanently covered with Northwest. "Here and now" seems to make some sense -- particularly in times like these. It doesn't sound clueless to me at all.