The TOCTOU is relevant (without suid) if someone can quickly make the right prediction of the tmpname2 value that's generated by the PRNG used by mkstemp, and create a symlink with that value before gunzip is executed. After calling mkstemp, the code should use the returned file descriptor, and thereby eliminate all TOCTOU risk. However, on (perhaps?) most devices that would realistically use atop, the PRNG works well enough that that prediction would fail.
Yeah, sure, but only if you run atop as root, otherwise it'll just get a "permission denied", and if you can run atop as root with whatever flags you like, you might as well just run 'rm' instead.
It's not a suid binary, so while it's bad code and a smell, I don't think the TOCTOU is a security issue in how it's commonly run (i.e. as an interactive CLI running as your user).