Considering that, depending on the case (and honestly way more and much smaller cases than you'd expect), you can still manage to fit in a custom liquid cooling loop for one or both of your processor and graphics card, and still manage enthusiast parts (such as last generations' i9-9900k or Ryzen 9 3900x, and GTX2080ti as an example) in that same space, Managing heat isn't impossible or even hard. It just takes a little bit of planning which honestly is half the fun. Even without liquid cooling temperatures aren't honestly all that bad and within parity of their bigger cousins since the most heat generating parts are often able to pull air directly from ambient and not through the case, but again that depends on the case, and I guess sure, that is when choosing the right parts to match a certain power and thermal envelope becomes more important.
The rest of the points are pretty spot on, particularly sourcing parts. If AIBs had not gone cold turkey and stopped making RTX 2070 mini cards (talking sub 180mm length here) there was a real chance I would have built something out of the K39 or Velka 3 just for the sheer absurdity of it (and being able to carry it in small-medium camera bag). And speaking of the K39, good TFX power supplies can be expensive because of how low the demand is for them. That and prices atm are kinda nuts for good SFX power supplies and lets talk about cases. Purpose built cases are manufactured in smaller numbers and billed at premium, rivaling and exceeding the build quality and cost of premium Full ATX cases... but at least more cosmopolitan manufacturers are taking notice such as the Cooler Master NR200, which is the closest thing to what the following quoted text was thinking should be done. Honestly probably one of my favorite cases released this year for the sheer number of interior layout possibilities. the NZXT H1 is a pretty cool case too with the integrated AIO (though a shame you have to buy it as a kit).
Is it necessary to go below matx for small form desktops? Now with M2 drives, maybe case designers should start by removing space for hdd/ssd before going immediately to mitx in order to reduce size.
The mATX maximum specification for a board is 244mm², vs ITX's 170mm², 9.6" on a side vs 6.7" on a side. That's a lot smaller comparatively. Many cases nowadays are already trending to the omission of dedicated space for 3.5" drives and ODD (2.5" drives are super easy to find space for however), but just leaving the space empty or using it for more cooling options rather than reducing size. Additionally, the extra two to three PCIe slots provided by an mATX boards can be very useful yes, but generally are the reason why mATX boards AND cases are larger (Because they have to be), and unnecessary outside specific use add-on cards like a dedicated sound card, capture card, or in larger builds, a second graphics card if you so feel inclined, things that either can be replaced by a USB3/TB external box or just not needed.
At the end of the day though, all higher end/gaming desktop computers are some kind of form over function, else we'd be using open test benches or some generic box that provides enough airflow and space to hold everything we need. Go with what you want, what you like, and have a good time doing it.