Hmmn, nothing stupid in what happened here. No one got denied another visa because they won the DV. OP got denied a NIV due to a demonstrated immigrant intent and the inability to convince the CO they have strong ties which will ensure their return to their home country at the end of their program, not simply because they won the DV lottery.
In general, all NIV applicants are presumed to harbor an immigrant intent, the onus is therefore on them to demonstrate they have strong ties (that will necessitate their departure from the US) to overcome this presumed immigrant intent. The presumed immigrant intent becomes a demonstrated immigrant intent upon the submission of the DS260 form (which is the reason we keep telling DV selectees, especially those with high CNs to not rush into submitting the DS260 form).
As to your remark of this being stupid and BS, FYI: being selected does not constitute a demonstrated immigrant intent nor does it automatically lead to a NIV denial if no steps have been taken to initiate or process the DV selection. Also, several selectees who did submit the DS260 and were waiting to be scheduled for their interview have successfully obtained NIV during that process as a matter of fact. They were able to convince the COs of their strong ties necessitating their return back home even with the ongoing demonstrated immigrant intent.