Relaxing the requirement on FQDN allocation would open up a can of worms that is best left closed. For example, Diameter can use DNS for service location; if the NAI realms are "private" then this will break. Also, allocation of "private" realms would presumably require a description of which realms are "private" in order to reserve them. The IETF does not in general have the authority to allocate FQDNs -- that's the purview of ICANN.
I agree. If you think the requirement should be clarified (I guess this discussion is a proof that some clarification may be needed), would you prefer a MUST or a SHOULD?
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