As for "shutting down an unhealthy engine"; that is discussed in the report and the answer seems to be that there was only 1 indication that was anything wrong, a low oil quantity alert. Other indicators showed it may be a defective indication as temperatures and oil pressures were OK.
I beg to differ with your alternative reading. Per the report, the first indication was a low oil quantity, with fluctuations in oil pressure and a higher oil temperature (in normal range, but when taken together with low oil quantity tell a story).
And it's not true that the crew offloaded all their decisions to the ground:
At 0328 hrs, the engineer sent a message via the Aircraft Communication and Reporting System (ACARS) to the flight crew informing them about the recommendation by the technical services personnel for the aircraft to return to Singapore and requesting them to contact the engineering
control centre.
The crew then spent 20 minutes arguing to continue to Milan. After that, they got engine vibrations and made another phone call, presumably to convince their colleagues that they could still make it to Milan with the #2 engine at idle. In the middle of the debate, they get a call from the back that the cabin is filling with smoke. So then they agree to return, at #2 idle and bleed off, but leaving the pack on.
Only on a second call do they switch the pack off.
They repeatedly told ATC that they had no problem, the FUEL DISAGREE message they disagreed with, and, when the FC told them to disembark from the left side of their burning aircraft, they wanted to make absolutely sure that they weren't supposed to evacuate. Heck, they didn't even use the bottles until ARFF asked them about it. Probably didn't think they were necessary.
I'm just sayin'. That's not offloading decision-making.
My favorite recommendation:
The aircraft manufacturer evaluate the need for providing guidance on
how to perform fuel leak check with the engines operated at unequal
thrust. [TSIB Recommendation RA-2017-023]