It's a completely different story for GrapheneOS where it means losing one of the main kernel and userspace security protections. This is one of the only ways we can significantly harden the Linux kernel with existing security features. The Linux kernel has always been a huge security liability for Android and AI models are making that much more obvious to everyone.
Google will likely end up heavily using MTE in the future. Pixel 11 devices won't be able to benefit from it. They're at the start of 7 years of updates but they won't be getting the benefit of future updates enabling MTE. Pixel 8 and later will benefit from Google likely expanding use of MTE for AAPM and eventually beginning to use it by default. It's unlikely Google will stop working on expanding MTE due to the Pixel 11 hardware decision. Multiple other OEMs are interested in MTE for devices made for businesses and governments even if Google decided it wasn't worth the cost for Pixels.