To be fair, good noise cancelling headphones nowadays have "transparent" or "ambient aware" modes that actually electronically pipe the outside noise in. (Whether the cyclists in question are actually using that feature, who knows?)

I’ve also seen this. It’s completely insane. Especially when I consider how many times a sound alerted me to a danger while I was on my bike.

People use helmets because they are forced to. Not because they actually believe they are doing something dangerous while casually biking to work. People who got convinced casual biking is dangerous just drive while listening to audio book.

No idea about bicycle, but for motorcycles, integrated helmet headphones are a thing for long time. It maybe helps that a typical motorcycle helmet is quite noise-cancelling by itself, so one relies mostly on moving faster than traffic and if that fails, on mirrors and not on sound.

Besides being an mc person I always considered bicycle helmets a useless compromise in that they don't provide true protection like full-face motorcycle helmets do. You're still as likely to leave half of your face on the obstacle, so either don't bother or wear something that would prevent that.