Every game not accepted to Steam might as well not exist. Steam will not ever accept every game submitted to them, for reasons both fair and unfair. Whether they think it's not good enough for their service, or it doesn't tick certain boxes on their checklist, or it's not what they're looking for, or they just don't like the logo or the name or they just don't feel like it. A lot of good people make good games that don't win the lottery of getting accepted to Steam. There are a lot of good games out there right now that aren't on Steam. Not a few. A lot. And this is how it will always be. Steam can not have everything go through them, they don't have the time or the resources or the desire.
It has been repeated many times (not necessarily by you) in thread that Valve should not have any reason not to distribute a "good" game. What the hell is a "good" game? How are you able to make the judgement that a lot of the games that are being rejected are good, when you've not played them? You might end up liking them were they to be released, but how are Valve going to decide which games would be considered good by sufficient number of consumers so as to justify their approval? In this particular case the game has been on another platform, so Valve has something to gauge the game's prospects by.
And that is just one consideration, there are evidently more as you've mentioned. But I would not use the term "lottery" to describe their approval process, especially when I have so little knowledge of it. Even from the outside it does not seem like a "lottery" process, though seemingly there are flaws, most notable being a lack of plausible explanation in case of a rejection.
What reasons would they have to improve, or to correct things they are already having problems with? For such a major player in the PC games space, their support is really poor. Why ever correct this? Why would they keep pushing their front end and service forward with more features if you want to make them the only game in town?
The same reasons that have driven Valve as a company all these years? Valve hired a renowned economist to study the digital economies in Steam ecology to better understand them and therefore offer better service. That's one example of Valve seeking continuous improvement. Despite the fanaticism and loyalties, a firm would not survive in a competitive market with stagnation. Steam has competitors, though they have smaller reach; competitors that offer part of what Steam offers, competitors that offer service which Steam does not. Indeed the fanaticism and loyalties have roots in the quality of Valve's output. If that output starts to lose its value, Valve would not continue to flourish, however large their footprint may now be.
If for some reason they went under, which can happen to even the most safe and successful companies, there goes PC gaming with them, at least for a time until other services filled the vacuum.
PC gaming would not die with a collapse of Steam ecology, even temporarily, because the PC market is not a monopoly. There would be a shock, no doubt. The market does not have a situation where barrier to entry is so high that new competitors cannot enter. And while it may take significant time for someone to parallel the feature set found in Steam, a satisfactory service is far from an improbability. Many already prefer GOG or Amazon over Steam.