As far as I'm aware, YC didn't cut ties with him. Rather, YC restructured their advisor program and he was offered a role in the new structure, which many other advisors did, but he declined for whatever reason.

Of course if you were YC trying to save face for everyone involved that's also exactly what you would do.. but I think it is ill-advised to jump to conclusions before the facts are in. It might be just what it is claimed to be: a choice by Pieter Thiel not to participate further for whatever reasons he might have. Certainly YC of today is not the same as the YC he originally involved himself with.

Interesting, but why would that prompt him to dump his FB ownership?

One scenario would be if he's about to be removed from the Facebook board (politely or otherwise). So he's beginning to clear his remaining investment ties to the company. Given his increasingly outside position in Silicon Valley, he may be looking at liquidating his ties to the area in general.

Like giving some Senate candidate in Missouri a bunch of money to go after Google?

Was that actually illegal? If it was an above-the-board campaign contribution, I'm not sure what the issue is.

Wow I totally missed this. Fascinating.

That is a good thing, like Thiel or not, Google is unethical company and should be taken apart.