There is rule support for this. Encroachment makes the ball dead. The players moved around some during a dead ball, and there was some contact that would have been a foul had the ball been live. But since it wasn't blocking by rule, which takes place only during a live ball, it couldn't be illegal blocking.
Since the ball is dead, only dead-ball fouls such as illegal personal contact are still on the table. So the crew actually had a choice: pass on the IBB or rule it a DB PF for unnecessary roughness, depending on the severity of the contact.
Given that the crew screwed up by not clearly signaling that the ball was dead, I'd have trouble going with option 2.
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