of course now anyone who can be traced to a wallet that interacts with these coins is now a criminal for receiving stolen goods, or obstruction of justice or probably a dozen other things.
I honestly have no idea why bitcoin is still the most valuable cryprocurrency when projects like Monero exist.
Because it simply can't be audited. What is the purpose of a public ledger if it is not auditable.
Don't get me wrong I love Monero, but the transparency of Bitcoin is desirable if you intend to enforce a fixed supply.
Also things like Taproot could give some privacy if they widely get used by wallets (by default for example).
On the other hand, if I steal $1,000 and make retail purchases over the course of twelve months less than $5 each, the monies would not be returned from the retailers to the victim of my theft. At that point it is up to the courts(civil and criminal) to force me to make amends to the original victim.
Your scenario is similar to the latter example for most of the end recipients. If an account with zero bitcoins receives a stolen bitcoin and sends it to one recipient, that recipient would certainly fall under the first scenario I put forth. As the transactions become more complex and diffuse, the latter scenario is more likely.