My impression is that Substack markets itself as a platform that refuses to censor unpopular opinions. In that context, hosting Nazi publications is, in a sense, a positive. If they’re not even going to remove Nazis, they’re definitely not going to remove you if you say something controversial.
It looks like many Substack authors don’t agree, or don’t think that safety from being deplatformed is worth being associated with Nazis, however tenuous that association is. Substack has to be careful to avoid a cascade in which respectable authors leave, which causes the reputation of the platform to decline, which causes more authors to leave, until pretty much just the Nazis are left. But Substack also has to be careful to avoid the opposite phenomenon, where any censorship will start a cycle of greater and greater censorship.