DNR is more for unexpected death. Planned death, such as suicide (whether medically assisted or not), still requires a DNR.
The only way a DNR is applicable is if the party who is performing the life saving is aware of the order (generally medical professionals). Unless you have it tattooed on you or something, how could a random person know not to try to save your life.
If the green text in the OP is true, I have no idea what their lawyer was thinking. There's no way to win that argument.
By the time paramedics arrived, the patient was alive by way of this passerby resuscitating them already. Even if the paramedics were aware of the DNR, it no longer applies because the patient is alive. So reasonable measures to keep them alive are appropriate. As long as they don't flatline again, the paramedics are in the clear.
I'm any case, DNR has a place. Including for those that don't want to die, but understand the aftermath of CPR is pretty unpleasant (broken ribs, for a start). So rather than suffer through the recovery from CPR, they have a DNR, so that if they go, that's it.
They're not in pain, nor seeking death, they just don't want to suffer through the trauma and recovery of CPR and related procedures.
This is very separate from palliative care, though most of the time they overlap. Palliative care is basically comfort care for people near death. Often palliative patients have a DNR, but not always.
Additionally, on the subject of palliative care, anyone who is not of sound mind, cannot consent to medically assisted suicide, and nobody can consent for them. So in any case where there is a mental aspect, such as dimentia, Alzheimer's, etc, such procedures are impossible. Even a power of attorney cannot consent on their behalf, one of few things that a POA cannot do on the patients behalf.
Palliative care, DNR, and medically assisted suicide are all parts of the equation, all with different purposes, frequently related, and often are administered together.
Source: my father died in January of 2022. He long started his desire to not become a burden like his mother was (Alzheimer's). His most frequent statement on this was that if he were to go "that way" to simply "hand him a gun and he would take care of the rest". By the time my brother and I realized he had "gone that way", he was too far gone to be able to do that, and too far gone to pass the required psychiatric exam to be eligible for medical assistance in the matter. He had to be put in a care home and we quickly got him a DNR. He was in there for... I think 5+ years? Before passing away "naturally". For us, he died a long time prior to his body giving out, and we would visit his corpse in the nursing home from time to time.
I have done CPR on people before, and it is astonishingly brutal. To do it correctly, you have to cave their sternum in to be able to apply enough pressure to the heart to actually move blood around. For "Out of Hospital Cardiac Arrest" patients that receive bystander CPR, the survival to discharge is around 10%, give or take. The most common outcome of CPR (if it is successful and you get a pulse back) is days to weeks of dying slowly and painfully in the ICU. The older someone is, or the more health problems they have, the much lower the chance of recovery is.
CPR is absolutely reasonable for a younger person that stands a good chance of walking out of the hospital at the end of it, but 90 pound 90-year-old is extremely unlikely to survive in a meaningful way. It is very reasonable to request to not be put through that massive amount of suffering for a very low chance of any meaningful benefit.
There's also degrees of DNR. There's separate options for CPR, intubation, supportive care, active treatment, palliative care, etc. It's a lot more nuanced than CPR yes/no in most situations.
Because you aren't allowed medically assisted suicide. The democratic government mandates a rough and tough death for you, because a merciful death is too awful for a fucking voter to think any more on than " Oh no, no death please. I don't want to talk about this anymore, go away or I call the police."
Life insurance might not pay out for suicides. If he has family or anyone else mentioned in his policy he may not want to jeopardise that. No idea if that applies to OP's neighbour, but it's one potential reason.