SpaceX’s IPO is believed to be set at wildly inflated prices. The company just isn’t that profitable, it lacks significant opportunities for growth, worse its facing significant competition in the near future. Trying to short it when index funds are forced to buy vast quantities of stock is a losing proposition, but those indexes are definitely getting hosed over the next decade.

At least that’s the general consensus, nobody would be worried about index funds buying stock if it looked like a good long term investment. Really the expectation that the stock price would tank is why there’s been a push to change the rules.

And historically indices had a waiting period for IPOs to allow for true market price discovery, and the fast tracking as well as allowing small float stocks into the index generates a ton of upward pressure on something that we already don't know the true value of.

Not true, they collectively lose investors if they become less attractive. Probably not an overnight thing, but if people are told that index funds are not attractive anymore then increasingly fewer people will put their money in them vs a hand-picked portfolio.

But also to follow the existing rules set in place to protect passive investors, no?

SpaceX will not "win". Its current investors will win by selling at IPO and in following months at inflated prices to unwilling buyers.