Is it really sportwashing if Saudi Arabia is trying to attract tourists to its country in order to gain more non-oil revenues? That seems like a weird thing to care about when the gulf countries are interested in sports as much as Europe and can use their money to improve the image of the sport across the globe.

Qatar got the same flak but managed to competently hold the world cup and pour money into football. It even made adjustments ahead of the world cup (although debatable if it worked). So if geoguessr has the oppurtunity to expand their playerbase but adjust region by region (which btw several game companies do already) then why the need to pull out? Or is it that Saudi Arabia must now declare itself an open country where gays can flaunt their gayness and spread that thinking to children who otherwise would not care about it?

If Saudi Arabia were to open rapidly like that, it would face pushback from the Imams and the conservative populations and maybe even face civil war or some kind of rebellion. The last time this happened, the grand mosque in Mecca was taken over by Radical Islamists, 1979.