They are actually 2 modes (you switch between the OS keys and the Fx keys by pressing the fn key). There is also an OS setting to switch which mode is enabled by-default (without pressing the fn key).

Right, so TouchBar increases the number of possible modes to basically infinity. Isn't there already a way to make the TouchBar just render the function keys?

Yes. Now the Touch Bar will (by default) display the function keys when the `fn` key is pressed, and display the current set of functionality per the application otherwise. There is, per the presentation and reports, an OS setting that allows you to switch which is the default.