I think at this point is clear that everybody has to assume that XZ is completely rotten and can no longer be trusted. Is it XZ easy to replace with some other compression tool? Or has it been so widely adopted that is going to take huge effort moving out of it?
There is no reason to assume that. Even if you assume every commit since Jia became a maintainer is malicious, the version from 3 years ago is perfectly fine.
Zstd has a number of benefits over Xz that may warrant its use as a replacement of the latter, and this will likely be a motivating factor to do so. But calling it entirely rotten is going way too far IMO
There is an interesting argument to be made that pre-JT xz code is probably pretty secure due to the fact that the threat actors would have already audited the code for existing exploits prior to exerting effort to subvert it.
I always use "zstd --long=31 -T0 -19" to compress disk images, since that is a usecase where it generally offers vastly superior compression to xz, deduplicating across bigger distances.
XZ offers slightly better compression on average, but decompression is far slower than Zstd.
IIRC memory consumption is generally worse for Zstd at comparable levels of compression. Which, these days, is generally fine, but my point is you can't thoughtlessly substitute the two.