The Peter Principle is too simplistic. Some people do well and become incompetent over time. Or they stay competent but the company and industry change around them. It's possible that this person was laid off due in response to a brief period of subpar work unfortunately timed with a layoff mandate, and that would be terribly unfair, but I have no way of knowing that.
I took the anecdote to be about why these people would be let go even outside of layoffs. Layoffs, I'm willing to say, can and should be somewhat random. At best, they are controlled burns of a forest that you can't see. It will destabilize the ones that remain and you don't know how many of them you will now lose.
To the rest, certainly possible. My sports metaphor certainly implies a pipeline of workers that will replace each other in a somewhat predictable order. But that feels like a different thing than "they may be producing great code, but are not reinventing the world."
