Well, prefacing this by reiterating that the story is very much an inkblot test that people are going to take away whatever they want to take away from it…
My interpretation was that this was a specific choice Tucker made to try to make his game stand out. Level 10 fire demons being difficult isn’t particularly memorable because it’s expected. But the campaign where the lowly Kobold is far scarier than any demon is something your players will tell stories about years after the fact. And it worked, that one aspect of his campaign is now literally world-famous, and people go on Internet forums to discuss the viability of doing something similar in their own games.
This is why I don’t agree with people who talk about Tucker’s Kobolds as an example of adversarial DMing or trying to “punish the players.” To me, I read the story and I see a GM doing an incredibly successful job at creating a fun and memorable story through gameplay, which the 5e PHB tells us is the primary objective of the game.
Adding to this interpretation, if I were to assume the Tucker’s Kobolds story is both true and a
mostly-accurate recounting of the events, and try to guess at Tucker’s rationale for choosing to make Kobolds the most dangerous thing in his dungeon, beyond it just being a memorable thing about his game, it may also been for pacing.
If, as was often the case at the time, the dungeon was organized into levels, with each level having its own biome and factions, and with deeper levels being occupied by higher-difficulty monsters, then making Kobolds - traditionally one of the lowest-difficulty monsters - the most dangerous things in the dungeon, would insure that every session starts and ends with a bang. You have to go in through kobold territory in order to get to the deeper levels where the better treasure is found, and you have to leave through kobold territory, now worn down from fighting stronger monsters and weighed down by all the loot you salvaged. So, you start off with a ton of high-intensity action, then things calm down a bit once you make it down to a lower level, gradually ramping back up the deeper you go, until you decide to turn back around, at which point it
kind of ramps back down. but, knowing that you’ll have to try to escape the kobolds again, that break is more of a tension-building device. The weaker the enemies get as you make your way back up, the closer you know you’re getting to those
damn Kobolds again! It makes what would otherwise be the denouement into the deep breath before the plunge. And then you end on another high-intensity, high-action note.
It would also make shortcuts and secret entrances that might bypass kobold territory in the dungeon into a highly valuable reward.