"I suppose my objection is that we are not seeing this application for Festival Square, with restrictions on vehicular use of Lothian Rd during set up time...."
Presumably not necessary given the location, the width of the road, the ease of access directly from the road onto the square. For the Fountainbridge market they've got to use one of two corridors, and I suspect the one they are using is wider (pretty sure it is) and certainly doesn't have as restrictive a height limit.
Not really sure I'd agree it's a 'chunky' impediment, given the diversion is 30 yards to the left, but noted I don't use the route a lot so can't really comment on how much of a delay that would cause.
For the Castle Terrace farmers market every week they suspend parking, which allows the setup to be directly from the road, something else which isn't possible in the Fountainbridge location (and if they were to close one lane of the road that would, of course, also remove the cycle lane on the road - so the choice is create a diversion of 30 yards or, using the road, put cyclists travelling east to west into a lane with traffic when they had a cycle lane, plus possibly block the ability to cross the road to access either of the corridors).
And parking and use of streets by motor vehicles is restricted reasonably often in the city for many and varied events (marathon, various other runs and marches and walks, during the Fringe).
Yes, cycling in this city is more difficult than it needs to be, but this particular example isn't just an attack on cyclists that wouldn't be levelled at other transport choices, it's really a natural restriction if you're going top host something like that in that location.
I like Morningsider's solution - engage with the market folk on cycling provision.