>Intel and AMD seem to have settled on sticking a relatively small (but still significant die-wise) GPU
Intel yes, but AMD only finally began integrating a GPU into most of their CPU line up with the latest Zen 4 generation.
>a large, powerful [integrated] GPU that a relatively small segment of the market wants
I think you're underselling the demand there, particularly if the M* line of CPUs with iGPUs from Apple are anything to go by.
Like I said before, people want powerful graphics processing at an affordable (FSVO affordable with regards to Apple) price.
>and you still have loads of people who don't want the GPU at all.
Intel's been doing iGPUs for well over a decade now because "loads of people" do want iGPUs.
Enthusiasts and professionals alike want them because they are a Lowest Common Denominator fallback for when shit hits the fan. People on a budget (whether monetary or electric) want them regardless of their poor performance because they need a display output, especially in recent years.
And even if you have a discrete GPU anyway, an integrated GPU is still useful to have for offloading certain tasks.
>It just doesn't make sense to fully integrate them unless die area is so cheap that power consumption is the main limiting factor
Five years ago I would have completely agreed with you, but with how bloody expensive discrete GPUs are now I feel there's a vacated market segment where integrated GPUs with sufficient performance and reasonable pricing can come in to conquer and dominate; not unlike how discrete sound cards became extinct when integrated sound cards became Good Enough(tm).