I think you're describing Bitcoin Cash, but AFAIK it's worth less than original BTC. What you're not considering is the brand value of BTC being the first and most famous crypto currency.
What I strongly disagree with is that a Bitcoin with bigger blocks and hence larger transaction capacity is inherently less valuable. That is an unfair comparison because Bitcoin Cash, when the split happened in Aug 2017, could have been recognized as Bitcoin by the ecosystem, but it wasn't, and Bitcoin Core retained the BTC ticker. Because of that Bitcoin Cash had to start adoption from the beginning, losing Bitcoin's established network effects.
My original argument was that if Bitcoin had increased its blocksize before 2016 as Satoshi Nakamoto originally intended [1], then the Bitcoin Cash split wouldn't have happened, Bitcoin adoption would have continued growing (remember that back in the day big players like Microsoft, Dell, Steam and Newegg started accepting Bitcoin payments) and miners would progressively see more of their rewards coming from transaction fees and less from the block rewards.
This last point is one of the big problems with BTC right now: the network security will decrease in the face of dwindling block rewards unless transaction fees rise. I argue that Bitcoin was always supposed to scale in number of transactions, so the aggregate of transaction fees, even if individually inexpensive (roughly 1 cent), would become larger than the block reward. In other words: the block reward was just an economic incentive to kick-start the Bitcoin network, to attract miners that would secure it, but the transaction volume was meant to keep increasing to replace it.
[1] https://bitcointalk.org/index.php?topic=1347.msg15366#msg153...
In my opinion there are two main issues that prevent crypocurrencies from being actually used as currency:
1. How many transactions per seconds can be handled 2. Their extremely high volatility compared to fiat currency
While blockchains can scale to fix point 1, point 2 is driven by forces outside the technology.
Regarding volatility I agree that it's currently an issue, but not an insurmountable problem in my opinion:
1. Payment gateways can offer automatic asset conversion to minimize volatility risk for payment takers. This means I could pay in whichever cryptocurrency the payment gateway would take and the receiver would get whatever currency they have set up in their account. They might want to keep some currencies and convert others, so the payment gateway could offer an option to decide that, and in which amounts (e.g. "keep 10% of each BTC payment, convert the rest to USD").
2. Price volatility should reduce as a cryptocurrency is more widely used. In the alternate universe where BTC scaled to be larger than all credit card networks combined its price could be more stable than many fiat currencies.
[0] https://blog.vermorel.com/journal/2017/12/17/terabyte-blocks...