I agree that excessive speed reduction down to say Vy can be counterproductive and is not something I did, though I know lots of other people who did. However if there isn't much crosswind it is probably no big deal. The issues here however are that making a big speed change halfway down the approach thus totally destabilising it was not contrary to the stabilised approach policy in force at the time. Huh, some "stabilised approach" policy!
Also very relevant is the lack of appreciation not just of this crew, but from the sound of it lots of other crews, of the inappropriateness and danger of using VS mode without IAS mode when the speed is back near Vy or in fact I'd say below about 110kts.
Bottom line is that for the want of a button press (IAS mode, either with or without VS mode) the accident would not have occurred.