"SpaceX could itself become a large commercial LEO destination."
Intuitively, it seems like if Starship is able to travel all the way to Mars, it could also work as an Earth orbiting space station. The major challenges that jump out at me are the different radiation and temperature flux environments. That being said, Starship has so much upmass capability that anything needed to make this work should be easy to ship up.
As for the floated idea of a wet workshop, that would be super amazing. But seems a bit overkill and perhaps even wasteful?
Is anyone actually surprised by this announcement? To me it seems like such a trivial development that it was always going to happen.
Wet workshops are more interesting, and I honestly don't know if they will ever happen with Starship. In the short term, I think that they are more effort than they are worth - it will be easier to make a habitat on earth then launch it than to try and fabricate something in space. That will all change as we develop in-orbit fabrication technology, and I can see a time not that far in the future where cutting into an empty fuel tank to create an inhabitable space would be an easy day's work. This leads to a question of timing, and I think that Starship will be replaced by better vehicles before in-orbit fabrication becomes routine. Could go either way though and both are very exciting prospects!
I, too, love the idea of a wet workshop, but I see the problems. Mostly, tanks don't need micrometeriod shielding and insulation, and weight-efficient shielding and insulation would not survive launch. The kind of protection you'd need to add would easily double the mass of the empty tank, or you'd have to somehow wrap the tank in space. The reward is enormous amounts of habitable volume, but I can't see the cost.
I'm a little surprised. Who knows what they consider the main dev tree vs a distraction for Starship, and I don't really see what this agreement adds that they wouldn't have already gotten from NASA through the human landing system contract. It sounds like SpaceX really phoned it in when they bid a Starship station as an ISS replacement, so, to me, that signalled that Starship stations weren't on their main path. I'm glad this is happening, but, yeah, I'm kinda surprised.