After I wrote my original post, a colleague e-mailed and said, "It can be argued that the digital repository is more cost-effective than a proper bricks-and-mortar archive." And he then goes on to say, "I don't see this one item as all bad..." I can argue both sides on all of the points Thomas Mann makes. And yes, I think relying on digital formats, in this day and age, makes sense, as long at the Library of Congress employs digital preservation techniques.
And maybe that is what is important about Mann's report and the actions that the Library is doing -- you can argue about them. You can feel passionate about them. And most importantly, you can think about what they mean to you and your institution, either because you rely on the Library of Congress or because you see them(LC) as a model that you want to emulate.
By the way, my personal hot button is over the LC Subject Headings. Although they are a standard, I find them hard to use (yes, and I am a librarian). I remember filing cards in a real card catalogue and learning the rules about the LC Subject Headings, but that memory faded l-o-n-g ago. Now I like to search using terms that are more familiar to me. So I don't see moving away from LCSH as being a bad thing. I think the work that people are doing to re-think "the catalogue" (like Andrew Pace) will help us as we move away from the old standards and towards something that fits with our current and future expectations.