Yes, this is true.
I'll defer to your experience watching/doing acrobatic moves in other sports.
I don't know that the ISU was specifically thinking about Olga Korbut when they banned the move on ice in 1976. My understanding, based on something I read somewhere ~30 years ago and no longer have access to, was that they just didn't want to reward flashy acrobatic moves that didn't rely on edge control skills. Some purists at the time didn't even like triple jumps (for the same reasons that some posters here don't like quads), but at least generating and checking (stopping) the rotation on the takeoff and landing edges was based on edge control skills, whereas backflips relied on acrobatic skills unrelated to skating skills.
There may have been some snobbery about pure skating skills as opposed to crowd-pleasing barely-skating skills more appropriate for ice shows.
Safety might also have been a consideration, but the main reason as I understood it was to maintain the focus on edge skills.
Similar reasons would also apply to detroiters and headbanger/bounce spins in pair skating, popular in ice shows but still illegal in ISU competition.
In recent years, more flashy skills that appeal to audiences but don't really rely on skating skills, such as knee slides and other sliding movements, cartwheels, etc., have become accepted and in some cases explicitly rewarded. So now backflips are officially accepted as well. With the possible rewards being in PCS and/or in GOE for choreo sequences that include them.
During the period they were illegal, there were other lower-profile skaters who executed them in competition other than Bonaly and Siao Him Fa. E.g.,
https://www.youtube.com/watch?v=kLxMS8Orc6g&t=4m35s. Also Dan Hollander at 1999 US Nationals, though I can't find video of that online. Like Bonaly, their final competitive performances. So I think of these backflips as a statement that they were done with amateur/eligible competition and moving on to a professional performing career where this skill would be welcome.
And speaking of professional/show skating,
@DizzyFrenchie, would you consider something like
this to be ugly?