> China then invented pinyin, which is a relatively well conceived and elegant system, but refused to support the replacement of characters and instead advocated for "simplified" characters (which are approximately as hard as the originals, but provide a convenient cultural gap).
This is only because the plan for simplified characters died midway through. There was a second round of simplifications that would have gone even further with talks of full phoneticization if that succeeded. However, the second round of simplification was simply too unpopular.
> While Lu Xun is now taught in all mainland Chinese schools, they conveniently leave out the part where he advocated for leaving characters in the past.
They definitely don't. His arguments and polemics about this are pretty well known in China. There are a variety of secondary and undergraduate courses that cover his collected works, with that specific quote showing up all the time. This is also a hot topic that repeatedly shows up in all sorts of Chinese online forums.
Lu Xun, like the other scholars of his time, was extreme in the other direction. He believed that it was fundamentally impossible for China to advance without a phonetic script and that China was doomed and it was impossible for the Chinese citizenry to achieve literacy. His arguments are generally discarded today because he said things that have been soundly disproved.
It is worth noting that many early 20th century scholars had a fanatical devotion to anything Western. They contorted Chinese to make it as close to Western languages, especially English, as much as possible, adding new pronouns, following Western grammar patterns, etc. Indeed, some early 20th century Chinese articles are quite awkward to read without an English background.
Leaving aside whether characters are "good" or "bad," there is an oft-raised, but mistaken, view that using a phonetic script for Chinese would not change the language. After all it is but a different medium for the same information.
But that's not true. There remains a level of diglossia in modern Mandarin that makes some modern works difficult to decipher when read out loud (yes this is true even if we leave out Classical Chinese). Using a phonetic script to write Chinese would necessarily involve a change to the language, not just its transmission. Whether that's worth it is a separate question, but it is a change.