Konsole can display images, as can kitty alacritty, western, iterm2, etc.

They can now? I know it was possible in some niche terminals but never knew it was as wide spread as that.

but it’s not exactly game changing

None of these features on their own are game changing I agree. But lots of small nice to haves can end up being game changing overall. Again - I don't think these terminals offer anywhere near enough to warrant their IMO massive downsides though. But I would love to see more innovation in the terminal emulator space.

Lastly, searching explicitly your last command for a term with context would be much better suited to the shell to solve as it’d be terminal independent.

I had a similar thought TBH. But the more I thought about it the more I came to see that in order to do this nicely - ie with inline scroll back or being able to collapse command output like these terminals do then you would basically need to implement a terminal emulator into the shell. Either way you are breaking down the wall between what a shell and a terminal emulator are doing. I would be interesting in exploring this from the shell side, though I cannot fault them from doing it from the emulator side either.

couldn’t be solved at the shells level or with supplementary applications

I think the key benefit here is integration rather than technical ability to do something. Making it easy and convenient to do goes a long way. There is a lot that can be made much nicer with things more tightly integrated together than trying to string up a bunch of disparate applications together - even if you can do it the integrated approach will give you a much more refined experience.

I doubt they’re outright rejecting any idea of progress

It sounds like an outright dismissal of new features to me.