They still own FeedBurner, too, (until they shut it down).

Most of the ad supported feeds I'm subscribed to have one ad post per week. Most ad supported websites have many ads per article. Guess which medium makes Google more money?

You can change this to:

1 ad per week on a RSS feed vs 1 ad per week on an entire website

and the answer would still turn out to be Ad Supported Websites. RSS users are an insanely small group compared to overall users on the web. So yeah, Google probably just decided that supporting RSS just isn't worth their money/time regardless of how it compares to its other services.

But you can't (reliably) run JavaScript in RSS which means no AdWords and no profile/context advertising. That's the stuff advertisers love, not one-size-fits-all banners

And hasn't RSS use been declining anyway? Not much of a threat.