Of course iterative cycles would be easier for devs, because each new generation would require games that were less technically advanced due to needing to run on older platforms. But that is absolutely not what benefits consumers, at all, who instead want to see considerably improved visuals, major shifts in game design, physics, tech etc, not just incremental ones.
Also, the cross platform example you gave actually works against iterative generational shifts, not for it. Most gamers vehemently dislike the idea of a prolonged period of cross platform games, e.g. games that are designed around both next gen and old gen hardware. These games tend to be obviously less visually impressive and accomplished than next gen only games. Luckily the cross gen period usually only bleeds a year or two in to a new generation. Old gen sales drop off so quickly, there's not really much need to push it beyond that.
Constant iterative generational shifts put us in what is essentially a constant state of cross platform releases. Probably less work for developers sure, as they can recycle more of their shit, and basically release more of the same but only slightly tweaked or improved in terms of graphical advancements, as their games having to also run on older platforms dictates that, but that is absolutely not what I want as a gamer and consumer who wants maximum bang for buck with each of my new gaming console purchases.
To break it down another theoretical way, in terms of how much of a jump the PS5 might offer in being a proper generational leap, versus an iterative one held back by older hardware.
- PS4 > PS4K > PS5 (with PS5 games that do not need to run on on the PS4K as well), offers 6x the improvement in visuals over the PS4, and 4x the visual improvement over the PS4K.
- PS4 > PS4K > PS5 (with PS5 games that do need to run on on the PS4K as well), offers 4x the improvement in visuals over the PS4, and 2.7x the visual improvement over the PS4K.
If the PS5 is held back by the PS4K, not only will there be a smaller jump in performance from the PS4K to the PS5, but also the PS4 to the PS5. That's frankly not something I am interested in or would support, in the same way I don't like cross gen games, but don't mind so much because they usually only happen for the first year or so of a new generational cycle, during the transitional period. I'm just about ok with the PS4K, but if the PS5 is held back by the PS4K (not just during a transitional cross platform period, but permanently), I will not be buying a PS5.