> Every full node can still manipulate the transaction to make it look like they are slashing rather than the person who originally reported the fraud. This is also a "hey why not, its free money" kind of incentive.
Following this logic, stakers themselves are incentivized to just run the software to submit a slashing tx themselves (free money), at which point just having stakers running slashing software is sufficient. And if they aren't someone else will submit it to the mempool.
I do agree that there probably will be altruistic validators in some cases, but the economic incentives work against them. The history of cryptocurrency has trended towards doing the minimum amount of validation work that satisfies network consensus[0]. It's entirely possible that the market just shrugs its shoulders and says that a violation of the Ethereum security model just isn't actually that bad. Consider the relative lack of concern over MEV[1] and automated arbitrage bots, and the fact that the valuation of the coin is entirely unconnected to any security issues it may or may not have. It may just wind up being the case that the network just... tolerates a handful of people getting screwed.
[0] For example, Bitcoin miners accept new blocks by literally joining other mining pools purely to steal their previous block hash. It's significantly faster than waiting for a full 4MB block to get P2P gossiped around the world, but the downside is that you can't actually validate any of the data in that block. This effectively means that miners aren't full nodes anymore, and the result has been several long chainsplits and reorgs whenever a softfork occurs.
[1] Miner Extractable Value