Nobody is a true free speech absolutist; and Musk least of all[0]. There are always limits to speech.
Things like libel, threats, blackmail, etc are also speech, and yet banned or restricted in some way. Social media are doing a lot of work exploring the edge cases of these, and it's possible laws need to be updated to account for the results.
[0] Years ago Musk cancelled a Tesla order from a critic. On Twitter, it didn't take him long to ban a lot of satirical accounts.
I agree with you, but I believe it is the case that Elon has previously described himself as a free speech absolutist, so this whole episode is exhibit 487 in the case for Elon having no idea what he's talking about.