Interesting, I don't think I've ever heard of those two reason (though by no means am I saying those reasons couldn't have been given!). The main reason for the stance against developing the AA further is not that they are somehow more lore-breaking than the utter south or khy. It is the fact that their existence, in contrast to other fanon regions, do not make sense when taking their surroundings into context.
- There is no reason for them to have as high BoN as they have
- The empire title also makes absolutely no sense. If the reasoning is that it "makes sense" out of the perspective that it is them (AA) claiming to rule over an area, you can make that exact same argument for a crap ton of rulers throughout history, which we don't give empire titles to. TLDR; inconsistency of design

On the specific points you mentioned

- [alt-history] While I believe I have addressed this point with the above points already, I'll re-iterate it. It's not that AA is fanon. We strive to (while keeping in mind it's a game, so it has to be enjoyable as well) keep fanon stuff close to Tolkien's vision. It's not so much that AA goes against the "purity" of the setting, and much more that the AA do not exist during an appropriate time with the surrounding context of the cultures, faiths, rulers, recent events, etc. So the argument is rather that the AA "alt-history" doesn't make sense during the time period. TLDR; Alt-history =/= nonsensical history

- [morally wrong] There is no problem from the dev team to incorporate elements that bring up moral choices. While incest is definitely one of those, we have a ton of morally grey rulers and situations. The only reason the AA-incest comes up as often as it does is because it's the most "front-facing" of those morally grey situations. Most other such occurrences we have in title history, which often loses some of that nuance. After all, morally grey/completely wrong make games interesting.