I think you hit it head on with this. It seems to be a control thing first and foremost. The worst nightmare is that you will grab their content in a text only format with no ads.

Yep, capital has viewed the interwebs main purpose as a massive direct marketing platform.

It's a very blinkered view. There's plenty of RSS feeds with text based adverts at the bottom of each article, and as most RSS reader apps show the article content in HTML, normal image based ads can work as well. So it's totally do-able to include advertising in RSS. A layperson wouldn't know how to strip the advert out either.

Yes, but advertisers (you know, Google's actual customers) don't like it, because they get less control over the appearance of their ads, and way fewer metrics/information about click rates etc.

It might also just be less effective than in-page advertising. Google and its peers probably know the truth of that, but I don't know if there are any reliable comparative studies in that area that don't fall into the "we tried to cram exactly the same strategy/campaign/content we would put in a banner ad into an RSS feed and got no uptick in sales" trap, but I'd love to read up on that area.

Regardless, the bandwagon effect of "traditional" online advertising is such that RSS is at best an (at present) tiny new frontier that would require advertisers to re-learn or change a lot of their content strategy, and at worst an actively advertiser-hostile platform.

Those are just observations; not statements of should/should-not.