There's not a lot of chip out as a consequence of the fret removal that I can see. It's the filling of the fret slots where the problem lies. The slots need to be filled totally flush with the surface of the fingerboard - completely flush so that you cannot even feel where the fret slots were. Anything less and the string will buzz at that point. And from what I can see the fret slots were filled with a wood filler which I have found to be inadequate in supporting the neck against the tension of the strings. Wood fillers compress or fracture under stress and that will lead to un-evenness in the fingerboard. It's bad enough with frets that aren't level, but a fretless neck needs to be dead true to play well. And in this case even if the slots were filled with an appropriate material, it is certainly not dead flush with the surface of the board.
Good options for filling the frets slots are some epoxies, plastic strips or a fine-grained hard wood. I like Maple or Ebony, but actually there are better light-coloured hardwoods than Maple - i.e. finer grained. But no matter if it's plastic or epoxy or wood veneer it needs to be dead flush. No bumps, no dips, no ridges, completely smooth.
And yes, IMO a proper built fretless board is superior to a de-fret. It can not suffer from differential reaction to environmental changes the way two different materials can. And even if you use ebony veneer strips on an ebony board, it's not the same as a solid ebony board because the veneer runs at right angles to the rest of the board. If the board expands in width with increases in humidity, the veneer will also expand in width causing it to stand proud of the surface - buzz buzz buzz.