Because most people will use it without reading the license, giving them the upper hand when they might needed it? Might sound a but harsh, but we're talking about Microsoft.

Is there a single example of MS doing something like this in the last 10 years?

That's not precisely a developer using the extension...

Maybe, but darned if I'm going to be the one to take the legal risk of installing it.

I'm willing to put good money that MS is not going to sue anyone for using this

I am extremely doubtful that they would. And yet, using it under that license is taking the legal risk that they'll act kindly even though they have the right, under the license, to be jerks about it.

Is MS going to be a jerk about it? Almost certainly not. Could they if they wanted to? Sure seems like it.