Your reading is too legalistic. I read it with "and" not leading to a separate effect (otherwise that'd be worthy of a new sentence), but rather connecting the two effects; being Fascinated is what leads to spending one's actions that way/doing nothing. It's a package deal.
As you've pointed out, it would be too horrible if interpreted the more severe way. And the CRB has a rule about that, that if a game mechanic seems to good or bad to be true, then it's likely being misread.
So in effect, the Viper Vine can bring the party to itself, but once combat starts, they're all there to fight. They might not want to be there though, and they might be Sickened 1 or Stupefied 2.
Funnily enough, your interpretation operates a bit in reverse. When the Viper Vine attacks, the effect ends completely, but unless they critically saved, the PCs have to save again at the beginning of their turn or become captivated (unless they've left the cloud of course). So the amount of heroes fighting will fluctuate every round, which yes, makes the cloud quite strong and why it has the Incapacitation trait so it can't be used as a minor minion w/ that game-changing ability.
The save DC is normal for its level.
CRB: "If any other effect has the incapacitation trait, a creature of higher level than the item, creature, or hazard generating the effect gains the same benefits."
Thanks, I think your interpretation makes sense, but I do think it could have been written better, since none of the additional effect has anything to do with the RAW of fascinated.