It's quite confusing as to why i'd do this.
The only reason I know of is if you are not using variable regen, and just want an on/off brake, and the AD2 line is used for the brake input, and you are using a simple switch for the brake input.
Because the AD2 line is analog input, it does not (cannot) have an internal controller pullup like a typical on/off braking type controller would already have, so you have to add one. Without a pullup, there is no signal for the controller to detect. With a pullup, the controller will see +V all the time on the input except when braking, when it will see 0V, so now it has a signal to work with.
If you are using an analog input for braking, like a second throttle, or an analog-output brake lever such as those Grin sells, or something like I use (a regular brake lever pulling the cable of a cable-operated throttle), then no pullup is needed or wanted.
here's a visualization of how i'd add this resistor:
View attachment 377379
The wiring makes sense to me because the phaserunner is wired similarly.
The modification does not. It seems like this may permanently engage the ebrake switch.
If the ebrake is not programmable in level, so that it can only respond to a full +V as "on", then yes, it would. In that case the fix is simple--wire the 10k resistor from ADC2 to ground, and the brake switch from ADC2 to 3.3v.
If it is programmable then set it for 0V = on, and full +V as off, and wire it as diagrammed.
I also don't understand why we are taking the 3.3v line and reducing it's voltage. We have a throttle that expects 5v, but we're giving it 3.3v minus some volts. why?
Because the VESC is a 3.3v device, then you put a 5v signal from a 5v throttle into it you will damage it. (you already know this, as stated further down

).
The mod with the resistor is on the AD2 line, for braking. The throttle input, AD1, doesn't get a mod (not that I can see anywhere in the diagram, at least). It's wired just like it shows--3.3v to supply the throttle (instead of 5v), ground for ground, and it take the throttle input signal as-is on it's signal input, AD1. Most of the analog (linear, or ratiometric) hall sensors I've dealt with split the +V supply for the center (off) point and it just goes up and down from there, so there is no need to modify the signal for the lower input voltage or the lower voltage range capability of the VESC inputs.
The only thing required (as you already noted) is like any other controller wiht programmable throttle voltage range / throttle response, and that's to tell (calibrate) the controlller to the actual available range of throttle output. (you do this for the Phaserunner as well, or the Cycle Analyst)
This makes it sound like an added safety feature and not a way to make a 5v throttle work at 3.3v
EDIT: Just to be very specific in case any readers haven't realized this: The 10k from AD1 to ground is a separate thing from the 10k from AD2 to 3.3v.
The 10K from AD1 to to ground *is* a safety feature, to prevent the "broken ground causes WOT runaway" issue. It is something that could (should) be built into all controllers, but isn't part of any of them that I'm aware of.
FWIW (pedanticness for future readers, just in case): there isn't any way to make a 5v throttle, that actually requires 5v, to work on 3.3v. You can supply it with 5v, and then downconvert / scale the output (opamp is the easy way) to 0-3.3v range, but that doesn't actually make it work on 3.3v...just makes it compatible with it. That's what that adapter board does.
Hopefully I'm not missing something in the diagram or the desired functionality; if not then the above should be correct.