My take on it is that he understood that absolute privacy of transactions - be it BTC, fiat, or whatever - naturally opens the doors to a myriad of illicit uses.
I just don't get how you've reached to this conclusion. There is no message of him discouraging the use of absolute privacy tools. To me it rather seems as he saw it as "private enough".
The possibility to be anonymous or pseudonymous relies on you not revealing any identifying information about yourself in connection with the bitcoin addresses you use. If you post your bitcoin address on the web, then you're associating that address and any transactions with it with the name you posted under. If you posted under a handle that you haven't associated with your real identity, then you're still pseudonymous.
You could use TOR if you don't want anyone to know you're even using Bitcoin.
He even talked about key blinding and group signatures long before Monero and other privacy protocols were introduced in concept:
Crypto may offer a way to do "key blinding". I did some research and it was obscure, but there may be something there. "group signatures" may be related.
There's something here in the general area:
http://www.users.zetnet.co.uk/hopwood/crypto/rh/What we need is a way to generate additional blinded variations of a public key. The blinded variations would have the same properties as the root public key, such that the private key could generate a signature for any one of them. Others could not tell if a blinded key is related to the root key, or other blinded keys from the same root key. These are the properties of blinding. Blinding, in a nutshell, is x = (x * large_random_int) mod m.
When paying to a bitcoin address, you would generate a new blinded key for each use.
In my experience, the simple answers are usually the correct ones. Satoshi simply lacked the competence to do that. It wouldn't be surprising. The very first Bitcoin version was quite simple in concept, and if you read the source code, you could tell it was just above the average. He did some mistakes, like the value overflow or reorganizing based on
block height instead of chainwork.
Maybe he ignored privacy enhancing techniques on purpose, but that's because it would be more difficult to explain to the public. Another guess: Maybe he didn't ignore them on purpose, but simply because it was too late to introduce them at the date he revealed interest about them.