Im guessing because FYE was a back to basics gritty bond movie they were heading into the dalton era they wanted to rid themselves of the cartoonishness?
yet then they got 007 in octop*ssy donning a clown suit
Nah. Check out the history of Kevin McClory and the Bond franchise. It's long and arduous so I'll give you the cliff notes breh:
Ian Fleming created Bond but Ian Fleming and Kevin McClory wrote the first bond script for Thunderball (before it was a book) and Thunderball was the first time Blofeld and SPECTRE made an appearance in anything Fleming wrote so McClory technically owned a part of Bond, which is why he got an executive producer credit on Thunderball. McClory's estate and the producers were able to work out a deal after Diamonds are Forever where they wouldn't use SPECTRE or Blofeld in anymore movies and McClory couldn't do anything with them for another 10 years. Then when 1983 comes along, McClory produces Never Say Never Again with Connery and it's basically a thunderball remake. So they included Blofeld in the opening of For Your Eyes Only as a shot at McClory and to say we don't need Blofeld or Spectre to make dope bond movies so eat a dikk
Then in 98, Sony and McClory were going to make another rival James Bond flick called Warhead AD, but then MGM told Sony they'd give them the rights to spider-man in exchange for the rights to Casino Royale (which was optioned to Sony way back in the day). Then last year, the McClory estate settled with Eon and they officially got back the rights to Blofeld, Spectre, and any characters associated. And here we are