the choice is not 'devolving into an authoritarian hellhole' or 'give the nazis the ability to do whatever they want'. There is a middle ground that we have lived in for many decades effectively, until recently.

What changed recently? Until the latest admins, most platforms didn't change their stance on what is and is not allowed all too much. I'm not trying to imply that dichotomy, just saying that simply banning nazis is not effective, because they just retreat into their echo chambers and fester until they can trick enough people into giving them power. I don't know what the ideal solution is, but simply banning them doesn't seem to be it, and neither do the two extremes mentioned seem reasonable.