If we look at claim 2, the term "technical restrictions" is often used as a synonym to DRM in many places. The law text use different words: "(A) to “circumvent a technological measure” means to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner".

Without invoking the circumvent clause, claim 2 looks misplaced in a DMCA notice. What aspect of copyright law is being invoked? The only thing left would have to be derivative work. The case law for that is spotty, through blizzard did win one such case if I remember right where a cheating tool enabled players to break the EULA. Blizzard argued that the tool assisted players in creating an illegal derivative work of the wow client, as the tool modified the client in an unlawful way against the conditions in the EULA, and thus the developers of the cheating tool could be held responsible for the creation. BSA could make a similar argument but I don't think they are based on how claim 2 was written.

If we see the DMCA notice as two distinct claims, and we remove claim 2 as being irrelevant in the context of copyright, then what is left is the BSA claim that the repository had copyrighted material and the accused that said they don't. Looking at the linked video myself, it seems that they did copy the installer iso from microsoft. Based on those observations I suspect that Ninjutsu os is simply an unmodified installer bundled with post-install scripts. That might be a copyright infringement, and if so, removing the unmodified installer and make the user download it themselves might resolve the issue. That is, as long as claim 2 is ignored.

As a side note, I would find it somewhat funny if microsoft later claimed that pre- and post install scripts create a derivative work. It has some interesting implication for configuration management utilities and cloud solutions.