Peer review: Is this "citation tower" a bad practice?
I think this requires some nuance. You seem to suggest that citing the earliest usage is preferable, and it might be. But it might also be the case that each subsequent usage adds something to the context. That is to say that the citation appears in the chain for some particular use and the reader of the current paper might find it useful to explore that history. Each of those citations is surrounded by context that can be useful.
If you always cite only the earliest usage, then the reader has no hints about the overall usage context of that thing cited. And the current author might be inviting the exploration.
Of course, it might also be that the author(s) considers the lemma to be a minor point and has used the citation they found without chasing the chain back themself, not seeing any need for it in the current context.
Overdone, in mathematics, we just always cite Euclid.
So, I don't think citing a later, rather than an earlier paper is a bad practice necessarily, but could be in a particular instance.
You can always note the other citations in your review and point to the earliest one without making any specific recommendation.