The users are eyeballs for the advertising. If enough of them leave, reddit will die. Digg is a tired but apt example of exactly where reddit is heading.
Is this specific incident gonna kill reddit.. of course not, but the "it's our site, we do what we want" attitude over time will. Reddit doesn't produce content, it provides and environment for others to produce content, and benefits from their presence via ad views. If those users stop liking the environment, they'll pick up and move elsewhere, and without a user base, reddit is done.