I don’t see the state file as a complete downside. It is very simple and very easy to understand. It makes it easy to tell or predict what terraform will do given the current state and desired state.
Its simpleness makes troubleshooting easier: the state files are easy to read and manipulate or repair in the event of a drift, mismatch, or botched provider update.
With the solution proposed it feels like the state becomes a black box I shouldn’t put my hands in. I wonder how the troubleshooting scenarios change with it.
Personally, I haven’t ran into the scaling issue described; at any given time there is usually only one entity working with the state file. We do use terragrunt for larger systems but it is manageable. ~1000 engineer org.