It's something we're not going to solve in a Lemmy comment thread, but this "paradox of tolerance" is something governments the world over struggle with.

And you are correct in saying that bad actors will find a way to leverage any perceived weakness (tolerance, kindness, decency) against you, because they experience no moral or social repercussions for doing so. It's the same reason something like the "Gish gallop" works, if you face no repercussions for lying exploiting the societal framework against your opponent by shifting the onus onto them to stay truthful and refute your lies mean you get to shift the burden of work to them, meaning it's easier and faster to lie and keep lying.

And yes, you are also correct on how curtailing speech by legislation can be a slippery slope, malicious actors will likely leverage whatever you come up with to curtail hate speech and inciting of violence against their targets groups into the exact thing they will use to then attack the liberties of those groups with. I just don't think not doing anything and letting societal repercussions do the job for us is working all to well either (see the rise of Nazi and other extremist right-wing ideologies).