A less creative interpretation would be that ICANN was asked to approve the purchase because the .org contract required it. ICANN called for feedback on whether it should approve, and many in response made their position very clear like the EFF, which lead to the rejection of the request.

Who stood to benefit from the sale?

Internet Society (ISOC) was the one selling, and said the money would create an endowment to fund their work.

That was just the cover (and a blatantly thin one at that); the real beneficiary would be the purchaser, which was buying what could easily be turned into a highly lucrative business for peanuts.

I guess I never really understood how. Are TLDs really worth that much income? Why would somebody choose .org instead of .com or their local TLD? Would they have tried to monetize by undercutting .com?

.org is among the cheap TLDs and widely used. If you want to make money from it, you jack up the prices and now many long-term established organisations using an .org domain now have to pay you more or have to give up their domain and find a new one, with all the follow up costs and consequences. People just now looking for a domain are fine, the ones committed to a name have an issue.