Ignoring the TOS for a second, isn't the main part of the complaint that his entire Google account is locked out?
This isn't just a 'please choose a "real" name' for access to G+ ... it's 'you can no longer access any Google service'
Granted, it's as a result of his choice of his name, but everyone affected by this is amazed by how their entire Google life is put on hold indefinitely due to someone not liking their chosen identifier.
What does it mean that Google is this insane about this one little thing? Yes, directed advertising is the obvious answer for an advertising company.
But you DON'T need a real name to have advertising directed your way, all you need is a record in a database. If I registered with G+ as John Smith (not my real name) they would be none the wiser, notwithstanding any correlation with my gmail and outside sources that they may or may not perform. The ads would still get to me.
However, if they were selling correlation to third parties ...
If Google+ ever becomes a household name, there'll be much less emphasis on real names. The risk of a super majority on Google+ by a minority in the real world will be gone.