... His demands for the storage are for a new version of the tool he is yet to write that is meant to actually cache the external link's webpages...likely to need Legal to look into

Just like any search engine keeps a reconstructable representation of the indexed text. There is absolutely no question that there would be any legal impediments involved.

a request he has yet to actually make to WMF Engineering.

WMF Engineering staff has known about the need for weeks to months.

he'd need to make a proposal with explanation and rationale before we would commit several thousand dollars of resources

How much exactly would it cost the Foundation to provide 24 TB on Tool Labs?

Why does the Foundation need a proposal to do that? Where is that requirement documented?

Shouldn't someone of User:Dispenser's stature, track record, not to mention the person-centuries he has already saved editors be given sufficient resources to experiment with different software architectures for addressing the kinds of problems he sees as community needs? Why do we need to impose a new layer of bureaucracy on that?

That he has not in fact moved his existing tools to Tool Labs is unrelated to this

Completely absurd. He owns his code, and since the Foundation has demonstrated that they apparently have no interest in helping him create expanded capabilities for it, he has every right to rescind his permission for the Foundation to use his code.

There's nothing that prevents us from allocating significant resources ... but we're not going to do that site unseen and without supervision.

So now developers have to fill out permission slips and obtain a Foundation staff supervisor? Where are these requirements documented?

The community needs to start publishing measurements of individual Foundation employees by how much their decisions help or hinder the editor community.