Is it illegal to use mspaint to generate similar vile things?

Not in the United States, but it is illegal in some jurisdictions.

Additionally, the entire "payment processors leaning on Steam" thing shows that it might be very difficult to monetize a model that's known for generating extremely controversial content. Without monetization, it would be hard for any company to support the training (and potential release) of an unshackled enterprise-grade model.

Most of Europe doesn't really have free speech, frankly most of the world doesn't. Privileges like making mspaint drawings of nearly whatever you want is pretty uniquely American.