The payload doesn’t have to be explosive to be self destructive. Spy gear and weather gear can be the same hardware, I assume the ROM on the hardware and the data collected would be the real evidence. Some well-placed magnesium strips or maybe even deleting the data as a failsafe would be effective. Wouldn’t surprise me if shooting it down was the least risky idea. It’ll probably be 40 years until we know what the real reasoning is though!

It would absolutely be bad, and there would—I hope—be consequences, but if they clearly didn't intend to bomb anything, it would probably not be considered any more of an act of war than if their balloon fell out of the sky and hurt someone.

Could you tell a lithium battery apart from an intentional self-destruct?