if you're a creditor, wouldn't you prefer the BTC rather than the fiat equivalent of the price at the time?

exactly, I was thinking this too.

If they're giving fiat equivalent of the price at the time, then who keeps the profits?

we both know that answer :/

was the dumping of the coins a deliberate action to bring down the market? what was the motivation for this? government? opportunistic chance to buy cheaper bitcoins?

My gut tells me they were shorting it at the same time, but who knows... in a way it's good for newcomers and believers to be able to buy cheaper but at the same time so many must've lost a fortune panic selling, etc...