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Are you enjoying Palworld?
(lemmynsfw.com)
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Agreed, all of the 'drama' surrounding this possible copyright case is largely created by youtubers and tiktokers for views.
That said, Nintendo WILL probably sue but as a formality to protect their brand, and will gracefully pay Pocket Pair's legal fees as a cost of business once the court rules in Pocket Pair's favor to keep their copyrights from lapsing to generic use. It's not uncommon.
Not doing that is how Bayer lost the copyright for 'Asprin' in the U.S.
Now if a ton of people refer to Pals as Pokemon the same way people refer to all tissues as Kleenex, THEN they might legitimately run the risk of losing their copyright and will pursue aggressively but I don't see that happening.