The first is what they describe here: as an attack. It's like why would anyone ever overflow a buffer with shellcode.
The second is that they are implementing a spec that requires appending a varint length-prefixed field to a buffer but don't really care about the space optimization, don't know the field's length when they start appending it, and don't want to put the field into a second, temporary buffer or slide it down into place. https://github.com/FFmpeg/FFmpeg/blob/468a743af1653a08f47081... vs say my own code which does the slide: https://github.com/scottlamb/retina/blob/6972ac4261ce7bf5b58...
It's uncommon but I've definitely seen it done (with media containers like Matroska, not actually LEB128) in extremely high-throughput systems that can't spare any cycles.
If you can choose a fixed number of bytes for the length prefix, you can skip that number, do the encoding and find out the length, and then come back and fill in the length-prefix after.
But you actually don't know how many bytes it will take without doing all of the work to know the payload length (since larger payloads take more bytes to represent the length).
If you allow overlong representation you can reserve a few bytes and sometimes it'll just be the effective no-op bytes. If you don't, you won't be able to.
I happen to be guilty of a variant of this, where I don't bother emitting a 16-bit floating point number instead of a 32-bit one in my CBOR encoder even if it can be represented exactly. That one is laziness.
Either way, a properly written decoder (and it's like ten lines) should really not have any problems with it. I was agreeing with you.
Edit: to clarify, I was talking about the author's argument being strange, not yours.
Edit: a properly written decoder is a lot more than 10 lines if you properly deal with integer overflow and both signed and unsigned ints.