Why make it easy for miners/pools to prioritize transactions out of band when there’s an option for RBF and CPFP where a miner/pool has to incur cost in sats? It seems to me that Bitcoin Core otherwise doesn’t want to encourage out of band transactions but why provide an RPC method at the same time?

The prioritisetransaction RPC was introduced back in 2014 to support miners who wanted to include a transaction in their mined block that perhaps was paying a lower fee rate than competing transactions. One possible use case that was speculated upon in that pull request (#1583) was “captcha-solving as an alternative to fees”. As with much of the Bitcoin Core code supporting mining I suspect it isn’t used much today but Core generally has to be pretty conservative in removing features in case it breaks someone’s software somewhere.

Regarding supporting out of band transactions this RPC doesn’t provide any support for receiving transactions bypassing the P2P network and Bitcoin Core mempool rules. Merely support for prioritizing the mining of particular transactions received through normal channels.