For this though the only outright thing you listed that's outright bad is monetization .
Before I continue with the other points: Video games have become better is a pretty subjective statement, so arguments beyond technical issues will inherently be subjective / personal.
Day one patches are an annoyance at best
No, they are not. Day one patches have two distinct negative consequences:
1. Longevity of the product is jeopardised, because publishers intentionally ship products that are not in a good state yet. As soon as the download services cease to exist, availability of patches is reduced or outright impossible (usually I would say impossible, but I am aware that Nintendo Switch actually has a system in place that allows you to share patches offline with other Switches nearby, which, indeed is neat).
2. The quality of the product is in the air, because publishers just guesstimate what major issues can still be fixed between print and release. If they miscalculate, then subpar products are released. Worse, yet, if the game fails to meet expectation some or all errors may persist indefinitely.
and the other things you listed are things people like.
Well and I (as well as others) do not. You may personally like these developments, I dislike them, either way, such a broad statement as "games have become better", in terms of design, is invalid. I would argue, for instance, that Banjo-Kazooie in 1998 has had the most well-designed open levels because of a clever natural player navigation and the perfect balance between providing enough room for exploration and keeping everything overseeable. At the same time it has a super dense interaction ratio, with unique content.
Game design , how we make games has gotten better as time goes on, just like how film, writing has generally gotten better as time goes on because we discover new and better ways to execute these things.
Do not mix up new trends with "better". In particular when it comes to writing, I am pretty sure a whole scientific discipline would chastise you for that statement. Of course, there is technological progress and there are more mature best practices, but in the end, game design is an artform and all the best practices will not help you if your creative output is not in place. Old games had the advantage of smaller team sizes and less extreme financial pressure, so that design by commitee was less common and unique strong ideas could be developed in full "AAA" capacity (for the time). For your time frame, consider e.g. NiGHTS into Dreams, Super Monkey Ball, Crazy Taxi and Blast Corps to find examples that demonstrate the fruitful effects of the more creatively open design approaches of the time.
The initial example was 98-01. Third person shooters didn't get decent controls until like 2005 with resident evil 4.
Resident Evil 4 has (basically) the same controls as Resident Evil 1-3. What it changed was the perspective. Which was a fundamental step in the development of modern day third person shooters, yes. But genre-specific control and camera innovation in the third person shooter space is pretty much irrelevant for the discussion of arcade-style platformers such as the Sonic series. Same for fighting games (which I cannot really judge one way or the other; I am not good enough a fighting game player to be able to judge the nuances here).
But .... day 1 patches? That's worse than decades of game design improvements that have brought he level of game design up? Are you serious?
I am serious and you just dismissed the other two points, which are relevant to my position as well. The stronger focus on busy work mechanics and repeat content to keep engagement high is, in my view, damaging to game design. It is a particularly damning trend for arcade-style games such as Sonic.
