How to react to this editor response after a long fruitless review phase?
Actually, you don't need their permission to withdraw the paper until you give them the copyright after final acceptance. The paper is yours to do with as you please. 

The answer you got is hard to decipher. It makes me question their competence, as does the long time "in review". 

Just tell them that you are withdrawing, though you might want to wait out the month that you offered. 

Find a better publisher.