I think it's probably a bit of both and I don't think you can fault him for either.
This may very well be some sort of a revenge for how the SIHF treated him. Him literally playing in the same facility as the Swiss WJC20 but not taking part is the ultimate way to rub it in
The SIHF clowns who stupidly extended their head clown despite zero results must be cooking
I don't think he's as big of a loss as you think though. Bünzli is probably a bit of a left field selection but all other 9 defensemen at camp totally deserve to be on this WJC20 roster. Even Bünzli has played well for Switzerland previously. I don't think they're gonna select more than 8 defensemen for the WJC20. Maybe just 7. I also don't think they're gonna count Dionicio as a forward so that means at least one defenseman with solid pro experience is gonna get cut despite Bichsel not playing. Could be more than one. I also think that David Moser and Joan Kyburz would be deserving of a WJC20 spot but they didn't even make the camp roster. Moser would have been one of few righties and has done quite well in the SL even last season already. Kyburz has become a regular in Sweden's top junior league as an 18yo.
So even with Bichsel out there's still huge competition for the defense slots on the Swiss WJC20 slots. I also don't think the selected defensemen are necessarily gonna be less solid than Bichsel...with the exception of Dionicio maybe depending on which face of his we're gonna see. The other defensemen, again with the exception of Dionicio, won't be able to create offense from the backend the way Bichsel would have but I don't think we have the team to power through opponents anyway (with the exception of Norway maybe) so a solid teamgame is probably the way to go and not smothering offense. The team is really gonna miss Bichsel's physicality and his ability to keep possession, hold onto pucks though. That can be a factor but without a dominant goalie and elite forward talent this team isn't gonna go anywhere anyway so I honestly don't care much. That's why I was always pretty indifferent re Bichsel's participation. I thought he was gonna play for sure but him not participating opens up a slot for another very good defensemen and allows all defensemen on the roster to get more icetime.
I agree that we wouldn't be able to get any further in the tournament with him. Historically dynamic forwards à la Nino, Hischier or even Kurashev could always elevate our U20 teams more than any dman, even Josi. But having a 6'5 monster on the backend that can eat 20+ minutes of ice time, play special teams and move the puck will always make you more competitive. And there is also the lingering danger of relegation. Granted I don't expect for the team to get sent down. Even if we loose to Norway, I see us as favorites against Latvia or Germany. But you never know. I certainly have not much confidence in Jenni outcoaching the opposition. And we are also not that far ahead of those nations in terms of talent that its a sure thing to win a relegation series. I'd rather go into such games with Bichsel on the roster. Here his puck moving ability could really come into play. And lets not forget that those teams have the edge against us when it comes to size. So we are loosing an important equalizer in that department too.