Yep, that pretty's pretty much it. Back in 1985 when the 386 and ARM 1 came out, neither had any cache at all.
But I think the paper is a bit narrow in scope, relative to the discussion here. For any given application, you want to find a cheap part that can run that application. If you can run the application on an 8051 with a few K of ROM, then you can save a lot of money and reduce power consumption by switching to the 8051. If you need a powerful DSP to do some SDR for your cell phone radio, you're going to pick a different instruction set and pick a part that draws a lot more power.
I think the paper is taking as fixed the part functionality and considering how the encoding can be changed, but for a core running code that is not user accessible, the engineers are free to choose a core with functionality that suits their particular needs (which you can't do with the main CPU).
What's surprising to some people is that Intel has successfully scaled down their x86 cores so you can use them as embedded cores in larger ASICs, essentially. You can reuse a successful core design like the Pentium 4 and adapt it to a modern 14nm or 10nm process and you end up with something cheap and easy to use. 10 years ago that wouldn't have worked. Even recently it was much more common to use dedicated DSPs everywhere, but these days I feel like people are ditching the DSPs for cheap and ubiquitous general purpose CPUs and microcontrollers.