I'm not really as wary/incensed about it as 99 and Playgoer seem to me. I think on a process level... if Equity's membership wants to do away with the rule that you can't move a show to a smaller venue and decrease pay to labor, that's their right. It is a bit weird and off putting on procedural ground that Avenue Q and the Union would come up with a legalistic (and completely bullshit) way around it.
But the end result of the procedural BS is demonstrably good. The show will stay open. It will continue to employ people who will continue to get paid. Furthermore, it opens to the door to the possibility that other Little Shows That Could could make a similar move in the future. Which, contra Playgoer, would be a good thing, not a bad thing. [Title of Show], for example, would've done well if they could've taken their really great press and moved back to a small venue to reap the benefits of their show instead of closing after a very very brief run and joining the list of Broadway Flops.