the scenario sounds absolutely weird.
Some scholars point to a parallel Nuzi text of the Akkadians, which would suggest then that in the ancient Near East uncovering or unwanted touching (especially by an opponent's wife) of the genitals was a very shame inducing act. And was something that happened in society at large. It may seem strange to us because society has moved way past this (probably in good part due to the Torah itself).
It is completely unrelated to the previous
Thematically this passage comes right after a description of halisa, which in a sense is a ritualized shaming of a man by a woman by means of touching/uncovering. So its kind of just continuing the theme, and saying in this case ok/permitted, in that case prohibited.
it adds "show no pity" which is not used even for murder.
See Deut. 19:11-13 where it is used for a murderer:
וכי-יהיה איש, שונא לריעהו, וארב לו וקם עליו, והכהו נפש ומת; ונס, אל-אחת הערים האל. ושלחו זקני עירו, ולקחו אותו משם; ונתנו אותו, ביד גואל הדם--ומת. לא-תחוס עינך, עליו; וביערת דם-הנקי מישראל, וטוב לך.
Also see the Ramban ad loc. where he mentions two reasons for the use of such language here in our case (25:11):
וקצותה את כפה לא תחוס עינך (להלן כה יב), מפני כי הפתאים יהללו אותה
בהיותה עוזרת לבעלה, או מפני שהבושת מצוי ואין בו חסרון כיס
"you shall cut off her hand; your eye shall not show pity" and there
the prohibition is warranted because foolish people praise her for
aiding her husband, or because causing embarrassment is a common
offense and does not involve financial loss to the victim.
So basically the extra strong language is used to a) rebuff those that would claim that her actions were proper and justified, and therefore undeserving of punishment. Or b) rebuff those that would claim that insofar has her actions incurred no economic damages, she should not be held liable.