I'm not an expert and not on either side, but couldn't a notice like "by agreeing to these terms you allow us to turn on telemetry by default, and you are free to simply not use this software instead" be allowed?

Nope, consent cannot be a prerequisite of using the service/software, if it is available in the EU (or UK, since they grandfathered in GDPR after brexit) it must be usable with or without consent.

That is the reason many local non-EU ad-supported businesses (like local papers in the US) outright block all EU traffic. For example if I go to https://www.chicagotribune.com/ I get a blank page saying "This content is not available in your region".

Manjaro could do something similar by just blocking EU users from downloading it.

Absolutely NOT!

Why not? Can you cite a specific law text ?

I've been told that if you have mandatory telemetry in your application that's fine because the user has a way to opt out (it's a free market and they don't have to use your software). I believe the territory where you add an opt-out is a bit murkier.

"Opt-in or pound sand" is explicitly not allowed.