Creating an account on a website is a lot easier than installing and learning to use software, and a more familiar way of doing it for most people. The only disadvantage is that you have to trust the site, but that's fine for pocket change amounts for micropayments and misc expenses. It's an easy way to get started and if you get larger amounts then you can upgrade to the actual bitcoin software.
Was the creator of bitcoin suggesting that online custodial wallets were a good alternative, especially for smaller amounts?
From what is stated in the post the answer to your question is definitely yes. However, it should be taken into account that at that time the choice of non-custodial wallets was very narrow (was there anything other than Bitcoin Core?), so it should come as no surprise that Satoshi had just such an opinion.
Today we have a large selection of desktop, mobile and hardware wallets, but for a beginner who wants to invest a few tens of dollars in crypto, an online wallet with a good reputation can be quite a good start. I would still stick to that
“Not your keys, not your coins” rule, but I guess it’s all in the risk assessment and the amount involved when it comes to secure storage.