First off, I find this crazy that I would incur a cash charge for missing my first night when all nights were prepaid on points.
Just for the record...the option to pay no-show fee in points has gone away post-merger. Every points booking going forward is subject to a cash no-show fee. Agree with others who think it is poor form to charge any no-show given the situation. But well within the letter of the current T&Cs so once the property chose to charge a no-show not surprised charging a credit card is how they went about handling it. Luckily the OP has the original T&Cs that both parties agreed to at time of booking which allows for points in lieu of cash for no-show. So this should be relatively straightforward to address.
ETA: I also agree that $1000 per room is about right as the charge for one-night no-show penalty for this property during ski season.