The problem is that Windows is also used by many businesses, network admins, and tech enthusiasts too.
These users are in conflict.
What Microsoft should be doing in my opinion is using its Windows Home and Windows Professional packages to divide the complexity. Windows Home users can have the simplified experience, and Windows Pro users can have the full power. Wouldn't that make everybody happy?
That's a really good point and I agree with your solution. I doubt Microsoft would want to do the work involved in creating essentially two versions of Windows, though.
However, I don't recall the user interfaces being fundamentally different between those versions. And that's what they'd need now if they wanted a smartphonified desktop OS for the "average home user" (whatever that means) and the now over 25-year old interface for professionals.
If this is their motivation they have no clue. What messes the most with normal users is changing familiar functions and metaphors. The cost of adapting to changing UI for normal users is much higher than sticking to an older, even less-optimal, one. Sometimes this even causes a loss of function for that user as they give up on trying to relearn e.g. how to make text bold for nth time.