You might be hearing different things, but let's restate this so it makes sense to you.

"eliminates the 10% early withdrawal period"

For 2020, the withdrawal is not considered Early if it qualifies under the disaster requirements, including covid.

The penalty is not taken "over" any amount of years. The Income reporting for tax consideration is what optionally was deferred over three years.

"been extended into 2021? If they made a virus related distribution in 2021, is it exempt from the 10% early withdrawal penalty?"

There is no covid disaster beyond 2020. There are other disasters, of course.