Intuitively, that doesn't seem clever to me. (You're committing yourself to a less efficient, more clumsy language for the benefit of... what exactly?)

How does that law improve the language without falling into the trap mentioned elsewhere in this thread? (Optimizing for a pleasant "compile experience" at the cost of everything else)

Well, the rule is attributed to Niklaus Wirth, whose credits include Modula, Modula-2, Oberon, Oberon-2, and Oberon-7. The -* languages are extensions of their originals, so it seems his rule only applies within a single edition of the language. They can add new things, because they are new languages.

The justification, then, seems to be that if you legitimately need new features, then the language has failed and you should start over anyway. I think Python 3 is sort of an offshoot of this idea, except that many of the new features keep getting backported to 2.7 anyway.

Given that Oberon-7 is a subset of Oberon, reducing it to the essential of a type safe systems programming language, I wouldn't consider it an extension. :)

There is also Active Oberon and Component Pascal, but he wasn't directly involved.

My mistake, I'm not intimately familiar with it. From what I can tell, Modula-2 and Oberon-2 were both extensions, though, to be used as successors to the previous language.