My 2 cents:
Getting the setlist.fm url reverse-linked here is, I guess, the ideal situation and in this case, editor dirkvandamme actually does sometimes take the effort himself to do so (unfortunately more often not). From setlist.fm-users’ perspective it’s more of a courtesy gesture towards MusicBrainz - even if ‘their’ artist gets deleted or merged here, it seems to have no consequences at setlist.fm so they have little incentive to improve their entry here.
From my perspective the most annoying thing about this practice is new artists often being added on a very thin basis (the most basic form of a possible concert listing or mention is sufficient for a setlist.fm entry) which makes it very hard to identify what a certain ‘name of an artist’ stands for, so editors can use the profile for other links/uses with some peace of mind. That problem remains even when the MB-artist gets a setlist.fm reverse-link because at the corresponding setlist.fm entry, you often find the same very vague reference/source for the listed concert, hard or impossible do dig into.
To me it feels like plain text information being upgraded to linked data prematurely, which -depending on the case- leads to new artist mix-ups, high amounts of artists of the same name, typos almost impossible to ever fix, undocumented entries of artist names of only extremely local + temporary “relevance”, etc.
My personal view: as long as setlist.fm requires an MB artist ID, I’d be in favour of increasing the grace period before auto-deletion, allowing setlist.fm users to use the MB artist ID but also reducing clutter artist profiles data at MB. Maybe not an ideal solution but at least better than the bogus MB events and/or bogus artist urls links, which -as earlier mentioned- don’t even always end up getting a setlist.fm entry at all.