I will advise you do the KYC and take your assets and forget about to he casino. Do no it trust any third party to keep your assets with them. Remember that " Not your keys not your coin" is still very much important. I believe you have learnt your lessons from this experience now.
And what we learned from this situation? We can all find ourselves in a situation where the casino tells us that we have to go through the KYC procedure if we want to continue playing and depositing/withdrawing money. It's a "new normal", and we have to be ready for something like that, especially if some bigger money is at stake.
Well, I would probably take your advice... At least for this amount I would finish KYC and move the big part of that balance to my wallet, but I am not sure I would just forget about the casino. If it's going good maybe I would continue playing, and I would feel pretty safe about my future deposits & withdrawals.