Sure, the blockchain doesn't care, but in a maximally free situation, the NFT people would 'win' in the sense that it may only be worth paying high transaction fees (due to high demand for these JPEGs) to send around either expensive NFTs or large Bitcoin transactions. It may not be worth it / profitable anymore to use Bitcoin as an everyday currency.
If there is demand for expensive NFT transactions, shouldn't the users have the freedom to make them?
Sure, as I said, if we assume a maximally free market, that would / should be the outcome.
I just personally don't think that this is right. I believe the availability of a reliable, decentralized, worldwide payment network and digital currency is much more important to civilization than NFTs.
While I don't hate the idea of NFTs, the problem is that they're just glorified contracts that nobody can / does enforce. If someone plagiarizes some digital art you own, no matter whether your proof of ownership is 'traditional' (buyer receipt or proof you made it yourself) or whether that proof is an NFT on some blockchain, you will still need to denounce / report the user who technically stole it and still need authority of some kind to take down the copy.
Imagine movie studios minted an NFT of their movies and then hoped that would stop piracy. Of course it wouldn't. That makes NFTs mostly pointless; there's little to no benefit to traditional contracts.
So, allowing Bitcoin as a payment network to be taken over for the sake of something that's basically pointless, because there is nobody to enforce it, is very silly in my opinion.