You are judging work by somebody who doesn't feel compelled to follow guidelines made by other people with those very same guidelines. Those other people looked much more closely at flags for geographical entities, not movements, to come up with their guidelines. No one is required to follow them or retroactively abide by them. They are a great style guide but not the law.
Every flag serves a purpose. This flag's purpose is to show representation by color and design for everyone in the community. It's was the point to be busy.
Why don't they just stick with the rainbow flag? Because the idea of the rainbow encompassing everyone was made at a time when gay and lesbians came out with pride but many of the letters that abbreviate that community today were still marginalized more harshly, maybe even within homosexual circles. They weren't all suddenly anthropists and free from discriminatory points of view. Development of ideas and communities takes time. And that's why an artist took ideas from many different flags that were created over time and combined them into one. It is eye catchy and instantly recognizable, even at a medium distance still.
I don't find the result aesthetically pleasing either. But I recognize a) that wasn't the point of it and b) I'm not a member of the LGBTQ+ community. If from within that community a movement rises to change the flag into something else, by all means. Other than that my design opinions - and I suspect many other ones in this thread - are largely academic and frankly irrelevant.
Good flag bad flag is not the gospel. Take it as a starting point for new designs but don't scrutinize all existing flags by it.
It turned out to be a Twitter clone from ten years ago and I realized I didn't need that any more. If I didn't need to reach some people who cannot overcome the hurdle the fediverse proper puts up before being enjoyable, I would not be using it today. But media popularity post-Elon-Twitter and relative ease of setup have given the platform relative heft. But it's not open and not really federated so it's masquerading and we don't really want you know whose money is paying the bills behind the scenes either. If anything, the fediverse can learn from Bluesky a thing or two about onboarding people who cannot be asked to invest the time to make Mastodon enjoyable. It will take time, much more time, to get people, especially non-techy ones, to the new normal of being your own algorithm. I see Bluesky as a stepping stone in that direction that will survive in its own niche.