I wonder how bad the moon was since it seems Kira and Dax were able to return several months later and along with the local giant spiders seemed to get around without much of an issue.
It isn't at all surprising that the government did this. They are first post Cardassian government trying to rule a fairly fractured population. Do you think that 200,000 homes will just accept the lack of heat? There would be civil unrest and chaos if the government didn't do something. In the end short term stability over possible
(some small plot farmers survived, but that doesn't mean it would necessarily be suitable for large scale argi or that projects on the moon are necessarily better than sorting out those on Bajor itself) long term gains won out...so very unrealistic indeed.