If it is less expensive, it is harder to be reliable (because it's easier for a sudden new use case to outbid the available space), which is less useful for a payment mechanism.

If it has better scale (with the same technology), it will have higher centralization pressure. The higher price you potentially pay (in fees) to get your transactions on a smaller block chain is the price of higher security and independence. Perhaps the compromise is not at the optimal place, but please stop saying "below what the technology can do". The technology can "do" gigabyte blocks I'm sure, If you accept that you need a small cluster to keep up with validation, and all blocks are produced by a single miner cartel.

IMHO, Bitcoin (or any cryptocurrency) on-chain as a payment system is:

* Expensive: there is a (known in advance and agreed upon) inflation that we're using to pay miners. But by holding Bitcoin you're paying for the security of the system, even if it is not in fees.

* Unreliable: you never know when suddenly there will be more higher-fee transactions that outbid you.

* Slow, unless you already trust the sender to not double spend (in which case you don't actually need the security of the blockchain).

I don't know the future, and I don't know what use cases will develop and what they'll want to pay or what reliability they need. But let's please not throw out the one quality that Bitcoin is still good at: lack of centralized parties to trust.

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Pieter