Anything to not work on progressing the story. That's what it is and calling it anything else is just lying about it.
I'm fine with it if the dev says "I'm thinking about how to progress and have hit a bit of a wall so I am focusing on improving earlier content while I think about what to do." That's the only acceptable reason in my opinion.
You are making the same kind of game as this I just hope I can convince you that doing what this dev is doing right now isn't good. No one likes it. Same as when devs take their game and remake it from the start. So it sometimes takes years to get new content. If they don't abandon it on the way because they lost so much money because all their paying people left along the way. I have no issues with devs working on their game to make it overall better while still progressing their game at the same time. It's a choice they have to make. Ultimately they should want a finished product that they are happy with. I don't generally care if it takes a while to get an update to a game if it's good. Good things are usually worth waiting for and your game and this game I would say fit that category. Seeing an update like this though is disappointing. The DLC thing is also disappointing. Not sure what it will look like, but the mear word DLC puts a sour taste in my mouth. So I hope it's just a side story as you say.
Day1 dlcs is a horrible practice and well early access dlc is even worse.
Disappointed people are less likely to pay money or keep paying money. If that's not a concern this dev has fine, if it's not reflecting in his statistics that's great.
I can definitely understand your point of view on this. Before making my game, I used to be quite skeptical and I still am of a lot of developers. I've know Circle for a good while now and he has no intention on doing the things you just mentioned. The extra stories are just a way for him to close down Chapter 5 properly. There will be progression of the story and... things will happen, with both the MC and side-characters. So the characters will develop further and our blue balls will be gone.
On a side note: I am also going to rework some of my initial chapters to bring them up to the current standard, add some QOL features such as a replaying scenes, gallery, ect... to just pollish the game up before we get too far to go back. The initial impression needs to be strong and set the tone just right, which is why I can understand Circle doing it.
I'll be adding some new content along with this as well.
EDIT: You mentioned earlier that nobody wants the reworks and that would be true for most of the people that have played the game, but there's still new people discovering the game every single day, so making sure the initial impression is good, is important. Especially for the future if he ever releases it on platforms such as Steam.