Game development isn't like that, not everyone works on the same thing at the same time.
Expansions and DLC are often a way for companies to give art and level creators something to do when a new project isn't ready for them yet.
In this cases, it's not even people from the same team.
Right, it's not like all those 500 people are there writing special-sauce PS5 code. Most are building car models, or animating swing cycles, or writing dialog trees, or formulating and mixing sound effects. They're busy doing just plain "work"
...Conceptually, sure, Insomniac could have done what some other studios have done and work only on "next-gen" technology from the day the PS5 dev kits arrived, and not put any work out until 2022/2023/202X, mastering it and making sure it was mature for production use.
They could have waited for the winds to be perfect...
However, waiting for the tech to be perfect has not sped up any other developer in putting out their "real next-gen games." (Hellblade 2, still waiting...) It hasn't yet produced a current-gen-only game that is unquestionably superior to cross-gen work. (Ratchet and Flight Sim look pretty great, but then so do Horizon and Fz Horizon; all those UE5 demos look sweet, but there's nothing still to play.) And although it has been painful for us gamers to wait for dev tools to mature (in a way that we haven't been so prolonged in past generations,) it hasn't proven to be the best way for any game developer of any level to work with this generation's technology advancements. (Maybe in 2024 we'll look back and see what it was worth to spend the time heads-down in tech, but it's unimaginable that we'll regret having had new games to play for 3 years in the meantime.)
Also, it's just not Insomniac's work style.