Ethereum smart contracts have abilities far beyond a VPS, particularly around security, reliability, and trustlessness guarantees- Whether you think those abilities have value and justify a new platform is a separate question, but the argument that "this is like a VPS" is a misunderstanding of what ethereum is offering with its technology.

The large blockchain size, on the other hand, is a legitimate problem with ethereum (as with all blockchain systems.) Hopefully the devs will be able to solve this problem- They are hard at work on a potential solution as we speak.