I see what you mean. Yeah, that looks like asbestos to me, too - although I'm not certain that the entire clumps are of this material. I'd expect just a layer of maybe five to ten millimeters (.2 ... .4 inch). The rest could be a form of a spall liner. If they aren't using high tech fibers like Dyneema, you have to make the liner much thicker to achieve a similar protection effect. If, in addition, the liner material isn't fireproof, that's a reason more to clad it in asbestos.
WRT the ethics behind it, I don't think that they were necessarily callous. They looked at what was necessary to give the best protection in the case of an armor perforation. Here the choice is to be shred to pieces by the behind-armor debris, or to be burnt alive if the liner that protects you against the high velocity debris catches fire, or MAYBE to die of lung cancer some fifty years later ... under the condition that you can't afford or do not have the technological know-how about fire resistant high performance spall liners. Given these choices, I guess that most people would (grudgingly) accept the asbestos. Burning to death is not a nice way to go.