The shady part to me is Pixelfed vaguely mentions that Meta is "threatening legal action," and then they ask for money immediately after. This paints a David and Goliath tale, where Instagram sees a small startup taking away their users, and is trying to sue them into oblivion, and our donations will directly help. Instead, a later follow-up posts reveals "Well it's just due to the filter names."

I'm sure Pixelfed is a much better alternative to Instagram (I use neither), but the immediate segue from "Meta is threatening legal action" to "Please donate" implies that donations will be used to cover legal costs, when it sounds like the problem is pretty easily solved.

If you run an open-source project funded by donations, it is ok to ask for them every time you get any publicity. There is nothing shady about that.