I don't think the fault is on itch.io for their initial reaction to the payment processors' demands. It sounds like the processors basically said "Comply or your whole business dies in the ditch" and there's no way to fight that right away. So their initial response of compliance is the only thing they could have done - if they refused, the whole site dies. But now that we're here, itch.io needs to change course. Surely it's become obvious that, whereas Steam can and will survive this debacle even in compliance, itch.io won't if they stay in compliance with the censorship. There has to be some alternate solution, because both refusing to comply and fully complying would kill the website. If itch.io decides that they just can't afford to cut off support for Visa and Mastercard purchases on their main website, perhaps they need to start a second version of the website specifically for the content they don't allow, add alternate payment options to both, and then don't allow Visa or Mastercard to be used on the second one? And if that wouldn't work, there's gotta be other solutions that'll save this site, right?
itch.io, I understand that fully denying the processors' demands isn't an option, and I hope others do too. But fully complying isn't an option either - I think it's clear that your community will abandon you if you don't change course. There has to be another way, and it's your job now to find it - or fade into irrelevance if you don't.
...perhaps we can help, though. I've given my suggestion, does anyone else here have their own suggestions for third ways of handling this?