This is a very important point. Section 230 has little to do with local newspapers, many of whom run comments sections protected by Section 230 themselves. The core issue is that news has become increasingly nationalized as people sort themselves into partisan tribes with increasing fervor, thus delivering a greater desire for opinion content to reinforce those tribal biases, which can best be supplied at the national level in a one-size-fits-all fashion. If FB was completely killing off traditional news, we would expect NYT/WaPo/WSJ/etc to be on the way out, but of course as you observe the large national newspapers are doing better than ever.

In fact, newspaper circulation began dropping precipitously in the early 2000s in the midst of the initial internet/cable news boom, well before FB emerged on the scene as a dominant force in news.