They saw the package repo get hacked once, then did not isolate it further, did not audit it for other issues (using their own models!), did not monitor it after, and baked that behavior into the weights via RL.

They were not in network isolated VMs, from my understanding they used containers sharing a kernel, so a Linux kernel local privilege escalation across the whole syscall surface (there are zillions of these) was sufficient to break out. Breaking xen or firecracker or something would have been much harder, which is why cloud providers running untrusted workloads use them and similar tools. No system is impenetrable but it's not like they were following best practices here.