Everyone should definitely have had a PFD on. I don't routinely wear one in good weather (although I'm very strict about children wearing them), and I can't be judgmental about other boats who don't routinely wear them. But once the weather started getting rough, they all should have put on PFDs.
I wonder if the mainsail was off because it was one of the repair items? A torn or blown out mainsail would need replacing or repairing. Most people don't routinely remove their mainsail; as you noted, they flake them down onto the boom and cover them.
Heading south, with an east wind, they would have had the wind & waves on their beam. Very dangerous.
As with most incidents like this, it sounds like there was a combination of multiple bad decisions and bad luck.