As you said, in this case anyone can game the system.

Yeah, maybe there's no point in that. However, I would definitely prefer voting for witnesses that use the witness income not just to run nodes, but also contribute to hive in other ways. Obviously at this price it's not possible.

Can't we just run the old code?

No, because an attacker with majority stake will just vote 20 dummy witnesses and run whatever codes he wants to run.

We'll have to hard fork without being able to use hive (if the attacker censors people on hive).

That's not a huge problem though, people can still talk over many places on the internet and reorganize.