This response is very confusing to me, and it seems you have a very different understanding of what STEPS did than I do.
In my understanding, the key idea of STEPS was that you can make systems software orders of magnitude simpler by thinking in terms of domain-specific languages, i.e., rather than write a layout engine in C, first write a DSL for writing layout engines and then write the engine in that DSL. See also, the "200LoC TCP/IP stack" https://news.ycombinator.com/item?id=846028
You seem to think they're advocating a Scratch-like block programming environment, but I'm not sure that's accurate. Can you point to where in their work you're finding this focus?
I too believe STEPS was basically a doomed project, but I don't think it's for the reason you've said (moreso just the extreme amount of backwards compatibility users expect from modern systems).
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> You don't make leaps from paying grad students to play around with "how can we make programming better", you get it from all of a sudden an AI can just generate code.
I think this is a more compelling point, but it doesn't seem to explain things like the rise of Git as "a way to make programming (source control) better," and it's not clear how to determine when something counts as an "all of a sudden" sort of technology. They would probably say their OMeta DSL-creation language was this sort of "all of a sudden" technological advance that lets you do things in orders of magnitude less code than before.