I can't speak for Dave Packard (or Bill Hewlett) - but I will try to step in to their shoes:
1) HP started off in test and measurement equipment (voltmeters, oscilloscopes etc.) and built a good reputation up. This was their primary business at the time.
2) The customer base of the HP-35 and test and measurement equipment would have a pretty good overlap.
Suppose the bug had been covered up, found, and then the news about the cover up came to light? Would anyone trust HP test and measurement equipment after that? It would probably destroy the company.