The wpmu_new_blog hook is indeed deprecated and shouldn’t be used; however, it works because it runs after the new site has been initialized (see wp_initialize_site()) which means the database tables for that site has been created and filled with the default options.
So because you are updating the site’s options like default_comment_status, then you should use the wp_initialize_site hook and not wp_insert_site:
add_action( 'wp_initialize_site', 'setup_multisite_action' ); // use this
//add_action( 'wp_insert_site', 'setup_multisite_action' ); // not this
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