Yes, this is how normal everyday commerce works. My employer transfers some USD into my bank account. I then transfer some of those USD to my landlord's bank account. This is in no sense a reversal of an earlier transaction or an indication that an earlier transaction was "not finalized."

Fine, but the government has no special power over Bitcoin in this regard. If they hadn't found the key, they wouldn't have been able to issue that transaction, and any common thief who found the key could have done what they did.

The relevant meta-point here is that the government is uniquely positioned to come into possession of most keys that it wants (or more indirectly, render them useless by including them on sanction/embargo lists).