You're conflating issues here.
They should be expected to pay on $700 million because that's what the contract is. 10 years 700 million. The deferrals is just a workaround so they don't take a 70 million hit this year instead they are only taking 43 million. The NHL had to outlaw this a few years ago when guys were all signing 12 years deals just to bring the cap down.
Of course Pittsburgh wasn't going to sign Ohtani nobody has suggested as much. You completely missed the point there about small market teams losing players because of this. It's going to be an issue when the next small market player comes up for an extension. One of those teams might be offered 300 million, the Red Sox now can just offer 800 million and defer a bunch because its play money at this point and years don't matter.
The tax *was* designed to act as a cap. How often have we heard teams say they don't like going over it or losing picks because of it? Hell its why the yanked went several years without signing a big name.
The move by the Dodgers is within the rules, but just because its allowed doesn't mean everybody is cool with it. I don't think anyone expected $680 million to be deferred to get around a luxury tax today. This move is gonna piss off other 29 owners because it now makes the luxury tax irrelevant for the major teams and puts MLB right back in the same boat it was that led to the creation of the system to try and prevent just the big teams from acquiring free agent talent.