I wonder what this extension will do to crowds. Will the extra month+ spread crowds out or draw in even more people?
I think a bit of both. As people get vaccinated, they're getting more into the traveling spirit, and Disney would be smart to look for ways to surf the building wave of people bursting out of a year in isolation, and there isn't really much of anything else new or noteworthy going on, since Disney seems to be saving any other big debuts for October (Remy, probably Harmonious) or even later (Space 220, the two new roller coasters). So there will be some new people drawn in.
But it could also spread out another key category of park-goers. The festivals draw heavy crowds among locals, who have also provided a pretty sizable chunk of attendance during the pandemic in general. So my guess is that extending the festival dates will probably result in locals coming on more days than they usually do, especially those who want to get most of their eating and drinking in before the 50th anniversary events kick off in October. (While they may want to be in the parks for anniversary events, they aren't necessarily coming in every day for a week, and may in fact want to avoid the crowds who are. The visit patterns are different.)
So in a sense, it would be spreading crowds out, taking advantage of the fact that the parks are still relying heavily on locals. But rather than drawing more of those people, it would be drawing the same people back multiple times. However, there will be a wave of tourism during the summer, too; that's where the bigger crowd draw will come in, among guests from farther off.