There's sixty feet of fairway directly in front of the tee that is in bounds. Pitching up to a spot there allows a much wider array of shot angles and a shorter throw in general.
Part of the difficulty of hole 17 is the tunnel from which you have to tee off. It forces you to throw a relatively flat shot to get out. Flat flight makes it much tougher to stop the disc on a dime on that postage stamp green. Add in that by throwing backhand, John (and Paul and Will and Pat for that matter) were turning over their shot to aim it at the fat part of the green on the right and their shots are susceptible to gliding longer than intended. Which is exactly what happened to John's first shot, leading to him overcompensating and coming up short on his second and third attempts.
Laying up takes the tunnel out of play. It's a 160-170 foot shot to the green from there (slightly longer if you're playing for the wide side on the right). Still a relatively simple shot for players of this caliber. Players of lesser skill than they are able to execute it for a 3, I've seen it done. There's no case for "you can't lay up" on that hole. You can choose not to, but the option is definitely available.