Yes, that is extortion. I hope you manage to find a new place with a more amenable landlord. Someone's seriously milking this pooyai bahn thing.
What are the written terms of notice to vacate in your signed lease agreement? Typically, it's 1 month or 30 days. So give them exactly that. You have about 60-days to find a new place and not waste any more time or money on these robbers and what they claim they are entitled to.
With regard to not bothering with a lease after renewing or extending beyond the first year, stop playing the Thai landlord's lazy game. To save yourself from 'unexpected' liabilities, always get a new, signed lease. Immigration will want to see it anyway (plus the landlord's tibian bahn and ID card). If a landlord doesn't want to provide any of these, don't deal with them.
As for witnesses, I am assuming these multiple needs to provide a witness you mention is due to two separate and non-consecutive extension applications? It should be a one-time thing and doesn't need to be your landlord (especially THIS landlord). In Udon, it was the neighbor's oldest kid from across the street, one time, done. In Jomtien, they didn't need one.
You mentioned switching to a Retirement Extension. If the drawbacks you mention aren't insurmountable, do it.
You also mentioned getting a 1-year multi-entry visa from Savanakhet. If the drawbacks you mention aren't insurmountable, do that.