The actual reason is likely that all of these Kindles only support azw3 format ebooks, which are easy to strip the DRM from. This lets Amazon switch to only serving ebooks in kfx format, which are encrypted and harder to strip the DRM from. Amazon stopped allowing saving ebooks to your PC last year, likely for the same reason.
It definitely is frustrating though. I have an iPod from 2009 where the battery and hard drive still work fine, and I'm able to use the latest version of iTunes to sync my music and podcasts to it. Shoutout to Apple for that.
It is not like stripping DRM from Kindle books was the only available avenue that could halt the pirate ebook system. Moving the entire ecosystem to the format is still going to see all of the same material available on the high seas.
Worst case, the eye analog hole will ensure that books are the most piratable medium.
It seems weird that they couldn't simply ship a software update to support kfx. Is kfx decoded in hardware?
It's more complicated than that. KFX was not encrypted differently than AZW, it's just a proprietary format that no one else supports (AZW being more or less MOBI with some tweaks). The DRM and the format get conflated because the same enthusiasts who want to strip DRM tend to want ebooks in an archivable, portable, standard format that was not achievable with KFX (no other ebook readers care to implement the kind of features it supports, and the way it works is antithetical to coverting it to the more conventional formats). You could still download and strip DRM in versions of Kindle for PC that pulled the KFX format. Only recently did it get to the point that versions of the app supported by the DeDRM plugins weren't allowed to download new books.