I thought the reputation that mattered to YC was for taking on could-be-very-profitable startups, and making them (statistically) much more profitable.

Also, might your argument require that YC's leaders eventually gain access to a time machine, so they could advise their earlier selves against supporting projects which later proved disreputable?

No, what's done is done. You can achieve a lot with bad reputation too. But maybe one day the stream of startups or even the stream of money will dry up. As I said earlier, it's not an exact science and you never know when bad reputation will bite you.