"Why can't the freaks on AO3 just go and make a site for all the gross stuff and leave AO3 alone."
Because AO3 is that site. Because AO3 was that site long before you decided AO3 was better than the sites you bullied us off of before, and I can promise you if someone somehow comes up with a fanfic site you like better specifically for the 'gross stuff' you'll try to bully us off that too so you can benefit from it.
AO3's specific core purpose is to preserve fanfiction, yes, but it was also instigated as a host site for the fanfiction that kept getting yeeted off other platforms like Wattpad. Its designed to preserve all fanfiction, not just the fanfiction you, personally, think is 'allowed' to be written.
AO3 is the site for all the gross stuff the freaks make. We've been there just as long as you. We've been funding it just as long as you have. AO3 has specifically said you have a place here. The timeline was literally:
Wattpad/FF.net/LiveJournal purge fanfics > AO3 is born > The people who's fics got purged moved over to AO3 > AO3 gains popularity as the best functioning site > The people who pushed for the fics to be purged off Wattpad move to AO3 > The same people try to push for AO3 to purge fics.
AO3's source coding is open-access. You go make a polished, strict, rigid site where nothing 'icky' is allowed. You go make a site where you can control what is hosted. We already have our space.
AO3 was specifically made for the stuff likely to be purged from other sites.
It was built around "we need to own the servers" so we wouldn't have to deal with anyone else's judgment calls about what was acceptable in fanfic: Not corporate sponsors, not evangelical religious groups, not "save the children" activists... and not other fans who think that The Gross Stuff should be banned from public view, only shared via private email after you've sent in a request heavily laden with special keywords.
Some of the founders remembered when slash fanfic was kept under the table at the dealer's room, distributed with brown paper wrappers only to people who knew to ask for it specifically.
And they said: Fuck that. Our art is not a crime and we're not going to be ashamed of it. If you are ashamed to have your art next to it - there's a whole wide internet that's ready to host your G-rated genfic.
AO3 was built for the stuff that was unwelcome elsewhere.
Don't make me tap the sign but this is the sign: