As far as I'm aware it runs on exactly one Google product, because they aborted attempts to shoe-horn it into some others?
Point being is that making a micro kernel OS should be fully within their wheelhouse. If Google is not getting it done, there is some process or internal king maker which is preventing it from happening.
> ... the more I get a sense it seems like somewhere that Google engineers who aren't "good enough" go to "rest and vest"
The rest and vest thing is rare but the exception is usually people in acquihires they don't want to let go of. Usually they're the opposite of what you're imagining--very smart people they just don't want working at other companies.
The ones who aren't good enough are released. This is 2023.