The point of the rules is not to outright ban all things which can be dangerous at all, the point of the rules is to protect and ensure that nothing which is of imminent danger to an airplane is allowed onto the plane.

People can cause havoc with lithium ion batteries. People can cause havoc with dry ice. The measily little pop and fire isn't going to kill people, and the smoke and warning the device gives off, the tampering required to get the battery to explode are all too difficult to cause substantial harm with.

People aren't going to cause the instant death of 5 nearby people with a dry ice or a lithium ion explosion, and setting those things in motion is a very clumsy and hard to pull off sort of thing within the compartment of an aircraft.

Again, and I cannot stress this enough, the people running the TSA and making policy decisions are experts at what they do. Despite that their decisions may not seem logical, I am almost certain that if you had the scope and knowledge of the TSA that the people who set these rules do then you would undoubtedly consider the policies relatively tame and reasonable.