RPGMemes

It's really not new age reconning, the old testament literally has angels and other quasi devine entities in it. It's not that they thought the foreign gods were demons, it's that they had stories from their own religion that involved other gods.
Previously, it was common for nations and tribes to have their own God that they worshipped.
A segment of the Israelites believed that their national diety was best God, but not only God, because that would be silly. Everyone know El, Ashera, Yahweh and Marduk all exist, but Yahweh is first amongst the pantheon, or that Yahweh was actually the same as the other god but just used a different name for reasons.
When political strife broke out with Babylon that sect gained prominence and shifted towards monotheism as a rejection and denunciation of the Babylonian gods, both as a middle finger to Babylon and as a bolstering of national identity: preserve the culture by saying it's not just that this is your God, or that's it's the best God, but that it's the only God.
The difficult part is the thousand years of stories and belief making it extremely clear that there are other deities. So those stories warped and recontextualized those gods as evil gods or lesser good gods, errr... Demons and angels. A perfect, all powerful, all knowing god who created everything has special helpers to do things for him and has an adversary who is somehow able to resist him, but is also a companion, or a betrayal. Baal. Or is is baelzebub? Samael? Satan? It's so tricky to keep track of which came from early Judaism and which is a syncretism from a neighboring religion.

You slightly underestimate how broad the world of the Israelites was. They lived in tribes, but those tribes had a diety different from a neighbor tribe that they still recognized as "them". Different households would have their own God, and the nation as a whole had a patron God. They lived in areas with enough traffic and people that other gods wasn't a weird notion. Their interactions with Babylon are a significant recognized historical occurrence, and Babylon had a population of more than 200,000 by modern estimates during the relevant time period.

It's confusing to say that it's ignoring the social control aspect of religion to recognize that they weren't monotheistic at the time the ten commandments became part of the religious canon. It took a thousand years for them to switch from a subset of the Canaanite religion to a distinct monotheistic one.
The purpose wasn't to stop people from making their own gods, it was to stop people from saying any of them were better than Yahweh. It is not a subtle set of rules.

It's a coherent argument built on the flawed premise that the interpretation of the text as applied to modern Judaism is the same as it was applied to the proto-judaism of 3500 years ago. We have ample evidence that it would not have, and that time has changed the interpretation and, in some cases, the actual words, like the written form of Yahweh that would be pronounceable in their language being changed to an honorific and subsequently lost to time.